[Senate Hearing 111-1212]
[From the U.S. Government Publishing Office]





                                                       S. Hrg. 111-1212
 
    CLIMATE CHANGE AND ENSURING THAT AMERICA LEADS THE CLEAN ENERGY 
                             TRANSFORMATION

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             AUGUST 6, 2009

                               __________

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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                     ONE HUNDRED ELEVENTH CONGRESS
                             FIRST SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming
BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
AMY KLOBUCHAR, Minnesota             CHRISTOPHER S. BOND, Missouri
SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico
JEFF MERKLEY, Oregon
KIRSTEN GILLIBRAND, New York
ARLEN SPECTER, Pennsylvania

                    Bettina Poirier, Staff Director
                 Ruth Van Mark, Minority Staff Director
                 
                 
                 
                 
                            C O N T E N T S

                              ----------                              
                                                                   Page

                             AUGUST 6, 2009
                           OPENING STATEMENTS

Boxer, Hon. Barbara, U.S. Senator from the State of California...     1
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     2
Bond, Hon. Christopher S., U.S. Senator from the State of 
  Missouri.......................................................     4
Alexander, Hon. Lamar, U.S. Senator from the State of Tennessee..     6
Lautenberg, Hon. Frank R., U.S. Senator from the State of New 
  Jersey.........................................................    10
Barrasso, Hon. John, U.S. Senator from the State of Wyoming......    11
Merkley, Hon. Jeff, U.S. Senator from the State of Oregon........    12
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...    12
Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland    15
Whitehouse, Hon. Sheldon, U.S. Senator from the State of Rhode 
  Island.........................................................    17
Crapo, Hon. Mike, U.S. Senator from the State of Idaho, prepared 
  statement......................................................   143

                               WITNESSES

Wellinghoff, Hon. Jon, Chairman, Federal Energy Regulation 
  Commission.....................................................    18
    Prepared statement...........................................    21
    Responses to additional questions from:
        Senator Cardin...........................................    29
        Senator Klobuchar........................................    31
Sandalow, Hon. David B., Assistant Secretary for Policy and 
  International Affairs, U.S. Department of Energy...............    34
    Prepared statement...........................................    36
    Responses to additional questions from:
        Senator Cardin...........................................    39
        Senator Klobuchar........................................    42
    Response to an additional question from Senator Whitehouse...    46
Strickland, Hon. Tom, Assistant Secretary for Fish, Wildlife, and 
  Parks, U.S. Department of the Interior.........................    47
    Prepared statement...........................................    49
Krupp, Fred, President, Environmental Defense Fund...............    77
    Prepared statement...........................................    79
    Responses to additional questions from:
        Senator Cardin...........................................    99
        Senator Klobuchar........................................   102
Fehrman, Bill, President and CEO, MidAmerican Energy Company.....   106
    Prepared statement...........................................   108
    Responses to additional questions from Senator Klobuchar.....   131


    CLIMATE CHANGE AND ENSURING THAT AMERICA LEADS THE CLEAN ENERGY 
                             TRANSFORMATION

                              ----------                              


                        THURSDAY, AUGUST 6, 2009

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The full committee met, pursuant to notice, at 10 a.m. in 
room 406, Dirksen Senate Building, Hon. Barbara Boxer (chairman 
of the full committee) presiding.
    Present: Senators Baucus, Inhofe, Lautenberg, Cardin, 
Whitehouse, Merkley, Voinovich, Barrasso, Bond, and Alexander.

           OPENING STATEMENT OF HON. BARBARA BOXER, 
           U.S. SENATOR FROM THE STATE OF CALIFORNIA

    Senator Boxer. The hearing will come to order. Very happy 
to see all of you here.
    Today's hearing will focus on ensuring that America leads 
the clean energy transformation as we address the threat posed 
by climate change. I want to welcome our witnesses who will 
share their insights and expertise on this critical subject.
    We are facing two historic challenges in America today, a 
deep economic recession and the threat of unchecked global 
warming. During this hearing, we will examine the ways in which 
Federal initiatives are already addressing both of these 
challenges and about additional steps we can take to provide 
incentives for clean energy development to transform the 
American economy.
    This country can and should be a leader of the clean energy 
revolution. Clean energy and climate legislation provides the 
certainty that companies need and the signal businesses are 
looking for to mobilize capital and harness the greatest source 
of power we have in this great country, American ingenuity. 
Clean energy legislation is jobs legislation. By creating 
powerful incentives for clean energy, it will create millions 
of new jobs in America, building wind turbines, installing 
solar panels on homes, and producing a new fleet of electric 
and hybrid vehicles.
    Every time we have one of these hearings, the Republicans 
and the Democrats put different studies into the record proving 
their point, so I want to again refer to the Pew Charitable 
Trust study that shows that the creation of jobs in the clean 
energy sector is the one bright spot in our economy, the major 
bright spot in our economy, and noting that a charitable 
organization, I believe, does come to the table without bias.
    Legislation that provides powerful incentives for the 
development of clean energy technologies will put America to 
work and unleash U.S. investment to create innovative 
technologies and whole new industries right here in America, 
reduce our dependence on foreign oil, and protect our children 
from pollution.
    So I do look forward to hearing all of our witnesses today 
about how we can work together to rise to the clean energy 
challenge and to transform our economy.
    Senator Inhofe.

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. Well, thank you, Madam Chairman, and thank 
you for holding this hearing.
    I think it might be a good time, since we are going to go 
into August recess, to kind of assess what we have learned from 
these hearings. Madam Chairman, since I turned the gavel over 
to you, this committee has held over 30 hearings on global 
warming, with testimony from numerous experts and officials 
from all over the country, all over the world. These hearings 
explored various issues associated with cap-and-trade, and I am 
sure my colleagues learned a great deal from them.
    But over the last 2 years it was not from these hearings, 
at times arcane and abstract policy discussions, that we got to 
the essence of cap-and-trade; it was the Democrats who cut 
right to the chase. It was the Democrats, over the last 2 
years, who exposed what cap-and-trade really means for the 
American people.
    We learned, for example, from President Obama that, under a 
cap-and-trade, electricity prices would necessarily skyrocket.
    We learned from Democrat Representative John Dingell that 
cap-and-trade is a tax, and a great big one.
    We learned from Democrat Representative Peter DeFazio that 
``a cap-and-trade system is prone to market manipulation and 
speculation without any guarantee of meaningful greenhouse gas 
emission reductions. A cap-and-trade has been operating in 
Europe for 3 years and is largely a failure.''
    We learned from Democrat Senator Dorgan that the cap-and-
trade system, ``the Wall Street crowd can't wait to sink their 
teeth into a new trillion dollar trading market in which hedge 
funds and investment banks would trade and speculate on carbon 
credits and securities. In no time they will create 
derivatives, swaps, and more for that new market. In fact, most 
of the investment bankers have already created carbon trading 
departments. They are ready to go. I am not.'' Now, I am 
quoting Senator Dorgan in the case.
    We learned from Democrat Senator Maria Cantwell that cap-
and-trade programs might allow Wall Street to distort a carbon 
market for its own profits.
    We learned from the EPA Administrator, Lisa Jackson, that 
unilateral United States action--she was referring to the bill 
that is on the table now--to address climate change through 
cap-and-trade would be futile. She said, in response to a 
question from me, that U.S. action alone would not impact 
CO2 levels.
    We learned from Democrat Senator John Kerry there is no way 
the United States of America, acting alone, can solve this 
problem, so we have to have China, we have to have India.
    We learned from Democrat Senator Claire McCaskill that ``if 
we go too far with this, that is, cap-and-trade, then all we 
are going to do is chase more jobs to China and India, where 
they have been putting up coal-fired plants every 10 minutes.''
    In sum, we have a slew of hearings in three unsuccessful 
votes on the Senate floor--well, actually, I would say four, 
because we rejected the Kyoto Treaty in the beginning. The 
Democrats taught us that cap-and-trade is a great big tax and 
will raise electricity prices on consumers, I would have to say 
in a regressive way. In rich Wall Street, traders send jobs to 
China and India, all without any impact on global temperature.
    So off we go into the August recess secure in the knowledge 
that cap-and-trade is riddled with flaws and that Democrats are 
seriously divided over one of President Obama's top domestic 
policy priorities. We also know that, according to a recent 
polling, the American public is increasingly unwilling to pay 
anything, as the polling has shown, to fight global warming. 
But all this does not mean cap-and-trade is dead and gone; it 
is very much alive, as Democratic leaders, as they did in the 
House, they are eager to distribute pork in unprecedented 
scales to secure the necessary votes to try to pass this thing.
    So be assured of this, we will mark up legislation in this 
committee, pass it, and then it will be combined with other 
bills from other committees, and we will have a debate on the 
Senate floor. Throughout the debate on cap-and-trade, we will 
be there to say that, according to the American Farm Bureau, 
the vast majority of agriculture opposes it. According to GAO, 
it will send jobs to China and India. According to the National 
Black Chamber of Commerce, it will destroy over 2 million jobs. 
According to the EPA and the EIA, it will not reduce our 
dependency on foreign oil. According to EPA, it will do nothing 
to reduce global temperature.
    And, when it is all said and done, the American people will 
reject it and we will defeat it.
    Thank you, Madam Chairman. On that happy note, I will----
    [Laughter.]
    [The prepared statement of Senator Inhofe follows:]

                  Statement of Hon. James M. Inhofe, 
                U.S. Senator from the State of Oklahoma

    Madam Chairman, thank you for holding this hearing today. 
This is the last hearing on climate change before the August 
recess, so I think it's appropriate to take stock of what we've 
learned.
    Madam Chairman, since you assumed the gavel, this committee 
has held over 30 hearings on climate change. With testimony 
from numerous experts and officials from all over the country, 
these hearings explored various issues associated with cap-and-
trade, and I'm sure my colleagues learned a great deal from 
them.
    But over the last 2 years, it was not from these, at times, 
arcane and abstract policy discussions that we got to the 
essence of cap-and-trade. No, it was the Democrats who cut 
right to the chase; it was the Democrats over the last 2 years 
who exposed what cap-and-trade really means for the American 
public.
    We learned, for example, from President Obama that under 
his cap-and-trade plan, ``electricity prices would necessarily 
skyrocket.''
    We learned from Representative John Dingell (D-Mich.) that 
cap-and-trade is ``a tax, and a great big one.''
    We learned from Representative Peter DeFazio (D-Ore.) that 
``a cap-and-trade system is prone to market manipulation and 
speculation without any guarantee of meaningful GHG emission 
reductions. A cap-and-trade has been operating in Europe for 3 
years and is largely a failure.''
    We learned from Senator Dorgan (D-N.D.) that with cap-and-
trade, ``the Wall Street crowd can't wait to sink their teeth 
into a new trillion-dollar trading market in which hedge funds 
and investment banks would trade and speculate on carbon 
credits and securities. In no time they'll create derivatives, 
swaps and more in that new market. In fact, most of the 
investment banks have already created carbon trading 
departments. They are ready to go. I'm not.''
    We learned from Senator Cantwell (D-Wash.) that ``a cap-
and-trade program might allow Wall Street to distort a carbon 
market for its own profits.''
    We learned from EPA Administrator Lisa Jackson that 
unilateral U.S. action to address climate change through cap-
and-trade would be futile. She said in response to a question 
from me that ``U.S. action alone will not impact world 
CO2 levels.''
    We learned from Senator Kerry (D-Mass.) that ``there is no 
way the United States of America acting alone can solve this 
problem. So we have to have China; we have to have India.''
    We learned from Senator McCaskill (D-Mo.) that if ``we go 
too far with this,'' that is, cap-and-trade, then ``all we're 
going to do is chase more jobs to China and India, where 
they've been putting up coal-fired plants every 10 minutes.''
    In sum, after a slew of hearings and three unsuccessful 
votes on the Senate floor, the Democrats taught us that cap-
and-trade is a great big tax that will raise electricity prices 
on consumers, enrich Wall Street traders, and send jobs to 
China and India--all without any impact on global temperature.
    So off we go into the August recess, secure in the 
knowledge that cap-and-trade is riddled with flaws, and that 
Democrats are seriously divided over one of President Obama's 
top domestic policy priorities.
    And we also know that, according to recent polling, the 
American public is increasingly unwilling to pay anything to 
fight global warming.
    But all of this does not mean cap-and-trade is dead and 
gone. It is very much alive, as Democratic leaders, as they did 
in the House, are eager to distribute pork on unprecedented 
scales to secure the necessary votes to pass cap-and-trade into 
law.
    So be assured of this: We will markup legislation in this 
committee, pass it, and then it will be combined with other 
bills from other committees. And we will have a debate on the 
Senate floor.
    Throughout the debate on cap-and-trade, we will be there to 
say that:
    According to the American Farm Bureau, the vast majority of 
agriculture groups oppose it;
    According to GAO, it will send our jobs to China and India;
    According to the National Black Chamber of Commerce, it 
will destroy over 2 million jobs;
    According to EPA and EIA, it will not reduce our dependence 
on foreign oil;
    According to EPA, it will do nothing to reduce global 
temperature;
    And when all is said and done, the American people will 
reject it, and we will defeat it.
    Thank you, Madam Chairman.

    Senator Boxer. Thank you. You really started my day off. 
Such excitement.
    Senator Inhofe. But that is not the first time.
    Senator Boxer. No.
    Senator Inhofe. That is what you do to my days.
    Senator Boxer. I know. I am sorry. I apologize.
    Senator Voinovich--Senator Bond was here first. I am sorry, 
Senator.

        OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, 
            U.S. SENATOR FROM THE STATE OF MISSOURI

    Senator Bond. Oh, thank you very much, Madam Chair. I want 
to continue to brighten your day as we talk about clean energy 
and climate change.
    There have been a lot of charges that have been thrown 
around that Republicans are not willing to do anything. I want 
to point out that the Republicans are the party of yes when it 
comes to supporting clean energy, American energy, and 
affordable energy. We support harnessing the largest source of 
clean energy we have, nuclear power. The single greatest source 
of zero carbon, zero air pollution, base-load energy is nuclear 
power.
    Nuclear power will create tens of thousands of productive 
jobs, and that is in contrast to the so-called green jobs of 
wind and energy, which can only be bought with up to $100,000 
of taxpayer subsidy [unintelligible] to produce, 
intermittently, power that we, as taxpayers, get the privilege 
of subsidizing at the rate of about $20 a megawatt hour, when 
it blows, of course.
    Unfortunately, President Obama seems more interested in 
Iran's right to peaceful nuclear energy than expanding American 
nuclear energy. Republicans support clean hybrid and electric 
plug-in vehicle technology. Just last week we celebrated a new 
electric truck assembly plant in Kansas City, Missouri. We had 
on the mall totally electric plug-in vans with the private 
sector partners, including AT&T, Coca Cola, Frito-Lay. Madam 
Chair, your Pacific Gas & Electric, and my Kansas City Power & 
Light are going to be running these totally electric power zero 
emission vans.
    In Missouri, I am also working with our research in the 
universities and the Danforth Plant Science Center to develop 
economical ways of producing biomass to generate electricity 
with less emissions. We are using algae combined with carbon 
dioxide to produce transportation fuel, as we have discussed 
here.
    But I also support, as my fellow Republicans do, harnessing 
the American oil and gas lying off our shores and under our 
lands. Environmentally friendly drilling technology allows for 
oil drilling in an ocean that was safe enough to withstand 
Hurricane Katrina. And we do it without the pollution that is 
produced in other countries, which are now producing the oil 
and gas that we need, and from the best information we have, 
are going to continue to need for at least the next 20 years.
    Government estimates are that we have 144 billion barrels 
of oil waiting for us offshore if we only go ahead and tap it. 
In the American West, The Rand Corporation estimates America 
has over 1 trillion barrels of recoverable oil. That is more 
than 2,000 years of imports from Saudi Arabia. Government 
estimates, 200-year supply of American coal and a 95-year 
supply of natural gas.
    Allowing ourselves to use America's abundant supplies of 
energy will promote another Republican core belief, and that is 
affordable energy. Abundant supplies of American energy will 
help keep prices down, will help families stretch their family 
budgets and keep good paying jobs. We will oppose proposals 
from the other side of new energy taxes which will cost us jobs 
and hurt America while helping our competitors in China and 
India.
    We oppose intentionally hurting the American people with 
higher prices or putting a price on carbon, as 
environmentalists and some on the other side like to say. 
Instead, Democrats propose to impose pain on the American 
people, to force them to use less energy, which will not do 
anything for the climate. We support allowing America to 
harness its own abundant, clean, affordable energy.
    Finally, the reports of cap-and-trade legislation that the 
Chair intends to introduce will omit key details vital to 
determining its impact on families and workers. That troubles 
me a great deal, Madam Chair. If families are going to have to 
pay higher utility bills, farmers pay higher production costs, 
drivers face more pain at the pump, and workers face greater 
job loss, depending on how the cap-and-trade legislation 
allocates its tradeable allowances, we ought to be considering 
that over the August recess. I think the American people 
deserve to know how legislation will affect their energy bills 
and jobs. We can't leave these allocation provisions blank, 
with placeholders, if we are going to give Americans a fair, 
honest, and open, transparent view of the legislation.
    I would wonder how we can even hold legislative hearings on 
legislation without reviewing its key provision. And I would 
urge the Chair not to try to force the committee to do so.
    I thank you very much, Madam Chair, for giving me this 
opportunity.
    Senator Boxer. Senator Bond, I totally agree with you that, 
when we mark up, we will know exactly what the----
    Senator Bond. Will we know before the recess?
    Senator Boxer. Before? Today? No. We won't see that until 
after. We are going to have many, many more hearings before we 
mark up.
    Senator Bond. OK. Will we know those provisions when they 
are developed?
    Senator Boxer. Of course.
    Senator Bond. OK. That is what we----
    Senator Boxer. Absolutely.
    Senator Bond. OK.
    Senator Boxer. Senator Alexander.

          OPENING STATEMENT OF HON. LAMAR ALEXANDER, 
            U.S. SENATOR FROM THE STATE OF TENNESSEE

    Senator Alexander. Thanks, Madam Chairman. Thanks for the 
hearing, and I look forward to the witnesses. They know a lot 
about the subject matter we are discussing. And I like the 
title clean energy revolution.
    Senator Bond has accurately described a Republican proposal 
that we believe is consistent with the views of a lot of 
Democratic Senators as well; 100 nuclear power plants in the 
next 20 years, clean plug-in vehicles. I believe we can 
electrify half our cars and trucks--I learned that from one of 
the witnesses here today--during the next 20 years. Offshore 
exploration for natural gas, that is low carbon. And then some 
mini Manhattan projects on the things that we need to figure 
out, like capturing carbon from existing coal plants. By my 
computations, if all that were fully implemented, we would 
reach the Kyoto goals by 2030 without a cap-and-trade, and do 
it in a low cost way.
    My questions today are going to have to do with a separate 
part of the bill that is coming over toward us from the House 
of Representatives. There is a renewable electricity standard 
that requires States to create 20 percent of their electricity 
by 2020 from a narrowly defined group of renewable energies--
wind, solar, geothermal, and new hydro. It is a continuation of 
what I would call a national windmill policy that we have had 
since 1992, when we began to almost theologically subsidize the 
building of giant wind turbines as a way of powering our 
country.
    So if the title of our hearing is clean energy revolution, 
my question, then, to the witnesses and to others is, Why don't 
we have a clean energy standard? Why do we leave out, for 
example, nuclear power, which produces 70 percent of our 
carbon-free electricity today?
    I congratulate Mr. Sandalow for actually mentioning nuclear 
power in his testimony, which is rare for witnesses from this 
Administration. We had a very good meeting, several of us did, 
that Senator Carper had with Dr. Chu earlier this week about 
what he hopes to do about nuclear power, and he said what we 
believe, that it is safe, that we have ways to deal with the 
waste, and he wants to get it going.
    So if this is so important that we need to encourage wind, 
why don't we encourage nuclear power? And, for the record, I 
would like to include this chart of comparisons, two different 
options to make another 20 percent of the United States carbon-
free. The Administration has said that it wants--and it is 
mentioned in the testimony today--let's make 20 percent of our 
electricity from wind. OK. Well, why not, at the same time, try 
to make 20 percent of our electricity from nuclear? Both are 
pollution-free and carbon-free, and here are the comparisons.
    To do it with nuclear, you would need 100 new reactors, 
about the number we have today. To do it with wind, you would 
need 180,000 1.5 megawatt turbines, covering an area the size 
of West Virginia. Nuclear produces 20 percent of our 
electricity today; wind 1.3 percent. Nuclear is a base-load 
power. Maybe what we need is a base-load clean energy standard 
and a renewable clean energy standard. Wind, of course, is 
intermittent; it is only available when the wind blows. Nuclear 
is available about 90 percent of the time, on the average, that 
is why we call it base-load; wind is available about a third of 
the time.
    In our part of the country, Tennessee, it is only available 
about 19 percent of the time, and the only wind farm in the 
Southeast shows the net effect of the renewable electricity 
standard is to force us to pay more to buy wind from South 
Dakota, when we would rather be using it for nuclear or 
conservation or buying scrubbers for our coal plants.
    The 100 nuclear reactors would be built mostly on existing 
sites; wind would require thousands of miles of new 
transmission lines. We would have to pay for that. The subsidy 
costs for nuclear to build 20 percent of our electricity from 
carbon-free would be about $17.5 billion over 10 years, 
including the nuclear production tax credit. For wind, it would 
be 10 times that, $170 billion over 10 years, which is the 
production tax credit.
    The Chairman mentioned green jobs. There would be more 
under building 100 nuclear power plants, a lot more, than there 
would be under building even 180,000 wind turbines, according 
to the Department of Energy statistics. Nuclear plants last 80 
years; wind turbines 20. We have 47,000 abandoned mines in 
California. What if we add 180,000 abandoned wind turbines in 
the United States?
    The cost of building both is about the same, according to 
the National Academies, and the visual impact is 100 square 
miles for nuclear, 25,000 square miles for wind.
    So my question will be why not have a clean energy standard 
or a base-load standard that includes nuclear?
    Madam Chairman, I would like to ask permission to include 
this chart, following my remarks.
    Senator Boxer. It will be done, sir, yes.
    Senator Alexander. Thank you very much.
    [The referenced document follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   
    
    Senator Boxer. Senator Lautenberg.

        OPENING STATEMENT OF HON. FRANK R. LAUTENBERG, 
           U.S. SENATOR FROM THE STATE OF NEW JERSEY

    Senator Lautenberg. Thanks very much, Madam Chair. We are 
never quite where the Chair is, chairman or chairwoman, but 
this is a Chair of all abilities and talents.
    We are glad to see the witnesses.
    Today's hearing is our sixth in the past month on the need 
to fight global warming by building the economy of the future. 
During these hearings, we have heard from business and industry 
leaders that the U.S. needs to act fast to catch up to other 
countries that are leading the way on clean energy. Right now, 
for example, China is investing 10 times more of its gross 
domestic product on clean energy than the United States.
    We have also heard from military leaders that global 
warming is a serious threat to our national security. As many 
as 800 million people are going to face water or crop land 
scarcity in the next 15 years, setting the stage for conflict 
and breeding the conditions for terrorism, according to the 
CIA's National Intelligence Council.
    During today's hearing, we are going to hear more about 
science-based options. We have to reduce emissions, create 
jobs, and to grow our economy.
    Last month, the House passed the landmark bill that would 
fundamentally shift how America uses energy and confronts the 
challenges that we have. All eyes are now on this committee to 
see if we are going to do our part. We have got to reward 
innovative companies and workers that are building the clean 
energy economy and make polluters pay for the damage that they 
are doing to our planet.
    We must reduce greenhouse gas emissions by 20 percent by 
2020 to get on the track that we need to ultimately have by 
2050. That is a science-based achievable goal. And, in fact, 
the major new report by McKinsey & Co. found that the United 
States can reduce energy use by 23 percent by 2020 simply by 
becoming more energy efficient.
    We also need to invest in research and development to 
create jobs in the short-term and give our country the tools to 
compete in the long term. Right now, the House bill only 
devotes 1.5 percent of the allowances to research and 
development, but a Fortune 500 company like J&J, Johnson & 
Johnson, spends about 12 percent of its revenues on R&D. We 
need to improve the House bill to make sure that we provide the 
investments necessary to match our technology with our goals.
    If we accomplish these objectives, factories that are now 
dark and empty can find new life building wind turbines, 
geothermal heat pumps, solar panels, or any of the thousands of 
components that generate renewable energy.
    I hear our colleague from Tennessee, Senator Alexander, 
continue to ask why not more nuclear, and I think the question 
is a fair one. I remember when nuclear was a dirty word around 
here, and now we have seen applications come in from people who 
want to make the investment, and I think certainly we have to 
look at that more seriously.
    Just look at what has happened in my State of New Jersey. 
More than 2,000 clean energy companies now call New Jersey 
home. They employ more than 25,000 people.
    So, Madam Chairman, when we return to Washington in 
September, we need to take what we have learned from these 
hearings, get to work building our clean energy future, and I 
hope that we will have had sufficient debate and volume of air 
pass so that we can take that air into renewable energy. Thank 
you very much.
    Senator Boxer. Thank you very much, Senator.
    Senator Barrasso.

           OPENING STATEMENT OF HON. JOHN BARRASSO, 
             U.S. SENATOR FROM THE STATE OF WYOMING

    Senator Barrasso. Thank you, Madam Chairman.
    Madam Chairman, unemployment has now hit 9.5 percent in 
America. The Administration admitted again this week that 
unemployment will continue to rise. It will continue to rise 
despite promises that the President's $787 billion stimulus 
bill would prevent unemployment from reaching even 8 percent 
and would create or save 3.5 million jobs.
    Vice President Biden has said the Administration misread 
the economy. He is correct. Misreading the economy is a serious 
mistake, given the billions we borrowed from China to pay for 
that stimulus bill. The people depending on this Administration 
to restore the job market paid the price.
    Now some in the majority in Congress want to move at 
breakneck speed to pass a 1500-page cap-and-trade scheme. With 
the failure of an economic stimulus package to create the 
promised jobs, should America believe that the 1500-page cap-
and-tax bill will work? Supporters are putting a lot on the 
line by advocating the largest energy tax in the history of 
America. The burden of the bill will fall on the backs of 
working Americans in a time of high unemployment. And they are 
not being deliberative about this, they are rushing to do it.
    In an article in Investors Business Daily, Drew Thornley 
asks why the urgency. Why not more time for thorough cost-
benefit analysis? Why hurriedly push a bad bill just to get 
something passed? Why no acknowledgment that the countries that 
take the best care of their environment are the richest? 
Thornley also asks why not tap more of our Nation's abundant 
natural fuels in ways that are as, or more, environmentally 
friendly than other nations?
    Cap-and-tax advocates have tried to sell the American 
people on the idea that we can be energy secure by having less 
energy, but making it more expensive. They claim this approach 
will create jobs all across America, leaving no worker behind. 
They also claim that this cap-and-trade strategy will wean 
America off foreign sources of energy. They claim it is 
critical for our national security, and they claim it will make 
us competitive in the world.
    In response, I would simply ask the question, Why are Saudi 
Arabia and our Middle Eastern countries so vital to the world's 
energy mix? The answer, they have vast deposits of the world's 
oil. If America had the same amount of oil as Saudi Arabia and 
coal reserves that surpass any country in the world, would we 
be in a better position to win the energy race with China and 
India? The answer is yes.
    Well, we have that in America. We have oil reserves 
contained in oil shale throughout the West that rivals Saudi 
Arabia's deposits. We also have oil in Alaska, Louisiana, 
Montana, North Dakota, California, and Wyoming. Do the authors 
of cap-and-trade want to tap into that? No.
    We have coal reserves in the West, Midwest, and the South 
that have been referred to as the Saudi Arabia of coal. These 
are in the States like Kentucky, Ohio, Illinois, West Virginia, 
Montana, and my home State of Wyoming. Do the authors of cap-
and-trade want to truly tap into that? No.
    America has that and more. We also have the uranium, the 
wind, the solar, the geothermal, the biomass, the hydro power. 
We have it all, and we can develop it in a responsible way.
    What puts us in a better position to win the energy race 
with India and China? Well, the answer is American energy. The 
authors of cap-and-trade don't want to develop all-American 
energy resources; they want to start the energy race with China 
and India two laps behind, as opposed to three laps ahead.
    The more energy America can produce, the stronger the 
American economy will be. Energy development creates jobs; not 
just green jobs, but real red, white, and blue jobs. We need to 
keep all the American jobs we can, we need them all, and the 
solution rests on our shores.
    Thank you, Madam Chairman.
    Senator Boxer. Thank you, Senator Barrasso.
    Senator Merkley.

            OPENING STATEMENT OF HON. JEFF MERKLEY, 
             U.S. SENATOR FROM THE STATE OF OREGON

    Senator Merkley. Thank you very much, Madam Chair.
    It is a delight to have you all here today. As I was 
looking over your testimony, it is clear there is a central 
message: that we have here in the United States, right now, the 
technology, the resources, the know-how to build a clean energy 
economy; that economy will create jobs; it will cut our 
dependence on foreign oil; and it will reduce pollution. This 
sounds like a triple win. I look forward to hearing the details 
from all of you.
    Thank you.
    Senator Boxer. Thank you, Senator.
    Senator Voinovich.

        OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, 
              U.S. SENATOR FROM THE STATE OF OHIO

    Senator Voinovich. First of all, I would like to say thank 
you for this hearing and echo the words of my friend from 
Tennessee, that if you look at where we get our energy in this 
country, we are only getting about eight-tenths of 1 percent 
from solar, about 1.4 percent from wind. And what we need to 
look at is nuclear; we need to look at coal.
    It seems to me if we really wanted to reduce our emissions 
in this country, we would move very quickly on the nuclear and 
move very quickly to find technology that would capture and 
sequester carbon so that we could continue using coal. We know 
that those people overseas are going to use it. And I think the 
Senator from Missouri made a good point when he said that in 
terms of oil, we need to find more and use less.
    The public interest and private sector communities agree 
that the crucial factor that will determine whether we have an 
effective climate policy is the extent to which the policy will 
encourage the development and deployment of needed technology. 
Yet, regulation without sufficient available technology will 
result in high costs for American consumers while offering 
little hope that developing nations will answer the call to 
reduce their emissions.
    Tackling the climate change problem is not something we can 
do alone. I agree that the U.S. should be a leader. But while 
carbon caps or taxes are difficult to sell to the developing 
world, access to new technology is not. That is why, Madam 
Chairman, I have introduced a bill to create a new committee in 
the Asia-Pacific partnership designed to enhance and focus 
international cooperation on clean energy technology 
development and commercialization. The bill is designed to help 
speed the widespread adoption of these technologies and provide 
an additional foreign to engage rapidly growing economies on 
the production and use of clean and efficient energy 
technologies.
    That technology development is needed in the areas of 
carbon capture and sequestration, energy efficiency, and 
alternative sources of generation, such as nuclear, renewables, 
and alternative motor fuels and hybrids. That is without 
dispute.
    But the Waxman proposal does not address these 
technological needs in a manner that is consistent with the 
bill's mandates. Recognizing the disconnect between what 
technology can delivery and the bill's objectives, the authors 
include numerous provisions to mask the strain this compliance 
burden will have on the economy, that, if all these provisions 
don't work out as planned--and Government programs rarely work 
out as planned--the costs could be enormous.
    EIA's recent analysis offers a devastating critique of a 
proposal whose efficacy hinges upon a string of assumptions 
that defy political, practical, and technological realities. 
The analysis shows a range of impacts that may accompany the 
bill's implementation under a variety of technology and offset 
available assumptions. Notably, even in scenarios where low 
carbon technologies are deployed at paces that energy experts 
agree are implausible, there are significant economic costs.
    But if offsets and the growth of new technology are more 
limited, the legislation could devastate the economy through 
increases in electricity prices of up to 77 percent, gasoline 
prices up to 33 percent, and natural gas up 75 percent, 
resulting in a cumulative hit to the GDP of $3.6 trillion by 
2030, non-discounted.
    Senator Baucus recently said let's face it, the bill we now 
consider is ``a tax bill.'' I agree. It is not possible to look 
at putting a price on carbon in any other way. The Government 
is imposing a mandate with the intention of increasing prices 
to achieve a certain outcome. Accordingly, the costs associated 
with the bill should be considered with the seriousness that 
any tax measure is given.
    Against this backdrop, I would say that I do support 
efforts to reduce greenhouse gas emissions. But our policy 
approach must be reasonable, and by that I mean it must ensure 
economic stability by not causing fuels switching, rapid rate 
increases, or economic dislocation. And this is contingent upon 
achievable requirements, that is, requirements that are 
consistent with the development and deployment of sources of 
low carbon energy. During a time when the national unemployment 
rate is at 9.5 and the national debt is $11 trillion, our first 
responsibility, folks, is to do no harm to the economy.
    My goals are to keep this Nation's economy and that of Ohio 
on a sure footing while decreasing emissions. Climate change 
requires a long-term solution whose strategy is fully capable 
of accommodating the time necessary to reduce emissions in a 
manner that is consistent with low carbon technology 
development and deployment. We can greatly move the process 
forward if our policy approach embraces realistic goals, while 
providing the necessary resources and incentives to develop and 
deploy clean energy technologies.
    [The prepared statement of Senator Voinovich follows:]

                Statement of Hon. George V. Voinovich, 
                  U.S. Senator from the State of Ohio

    Madam Chairman, the public interest and private sector 
communities agree that the crucial factor that will determine 
whether we have an effective climate policy is the extent to 
which that policy will encourage the development and deployment 
of needed technology. Yet regulation without sufficiently 
available technology will result in high costs for American 
consumers while offering little hope that developing nations 
will answer the call to reduce their emissions.
    Tackling the climate change problem is not something we can 
do alone. I agree that the U.S. should be a leader. But while 
carbon caps or taxes are difficult to sell to the developing 
world, access to new technology is not. This is why I 
introduced a bill to create a new committee in the Asia Pacific 
Partnership designed to enhance and focus international co-
operation on clean energy technology development and 
commercialization. The bill is designed to help speed the 
widespread adoption of these technologies and provide an 
additional forum to engage rapidly growing economies on the 
production and use of clean and efficient energy technologies.
    That technological development is needed in the areas of 
carbon capture and sequestration; energy efficiency; and 
alternative sources of generation, such as nuclear, renewables, 
and alternative motor fuels and hybrids is without dispute. But 
the Waxman proposal does not address these technological needs 
in a manner that is consistent with the bill's mandates. 
Indeed, the requirements and mandates in the Waxman proposal 
are completely severed from what technology is able to deliver 
and will harm our competitive position in the global 
marketplace. Indeed, what we now consider is the most 
environmentally stringent climate change legislation proposed 
to date.
    Recognizing the disconnect between what technology can 
deliver and the bill's objectives, the authors include numerous 
provisions to mask the strain this compliance burden will have 
on the economy. Yet, if all these provisions don't work out as 
planned (and government programs rarely work out as planned), 
the costs could be enormous.
    EIA's recent analysis offers a devastating critique of a 
proposal whose efficacy hinges upon a string of assumptions 
that defy political, practical and technological realities. The 
analysis shows a range of impacts that may accompany the bill's 
implementation under a variety of technology and offset 
availability assumptions. Notably, even in scenarios where low 
carbon technologies are deployed at paces that energy experts 
agree are implausible, there are significant economic costs. 
But if offsets and growth in new technologies are more limited, 
the legislation would devastate the economy through increases 
in electricity prices of up to 77 percent, gasoline prices of 
up to 33 percent, and natural gas prices of up to 75 percent, 
resulting in a cumulative hit to GDP of $3.6 trillion by 2030 
(non-discounted).
    Reducing greenhouse gas emissions will require a 
technological revolution centered on the way we produce and use 
energy. That cannot be done without costs. But instead of 
accepting the economic impacts of reducing greenhouse gases and 
moving forward in a responsible manner, the authors and 
proponents of this legislation prefer to hold a basic economic 
principle--that there are no free lunches--in suspense. You 
can't get something for nothing; our economy is reeling right 
now because this principle has been ignored, and it is 
something we can no longer afford to do.
    And while the impacts might not be as high as outlined 
above, it is disingenuous to claim that this bill's mandates 
can be met for the cost of a postage stamp a day. Senator 
Baucus, Chairman of the Senate Finance Committee, recently 
stated in an interview that the bill we now consider is ``a tax 
bill.'' I agree. It's not possible to look at putting a ``price 
on carbon'' in any other way--the Government is imposing a 
mandate with the intention of increasing prices to achieve a 
certain outcome. Accordingly, the costs associated with this 
bill should be considered with the seriousness that any tax 
measure is given.
    Against this backdrop I'll say that I do support efforts to 
reduce greenhouse gas emissions. But our policy approach must 
be reasonable, and by that I mean it must ensure economic 
stability by not causing fuel switching, rapid rate increases 
or economic dislocation. This is contingent upon achievable 
requirements, that is, requirements that are consistent with 
the development and deployment of sources of low carbon energy. 
During a time when the national unemployment rate is at 9.5 
percent and the national debt is over $11.5 trillion, our first 
responsibility is to do no harm to the economy.
    My goals are to keep Nation's economy, and that of Ohio, on 
a sure footing while decreasing emissions. Climate change 
requires a long-term solution whose strategy is fully capable 
of accommodating the time necessary to reduce emissions in a 
manner that is consistent with low carbon technology 
development and deployment. We can greatly move the process 
forward if our policy approach embraces realistic goals while 
providing the necessary resources and incentives to develop and 
deploy clean energy technologies.

    Senator Boxer. Thank you.
    Senator Cardin.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 
            U.S. SENATOR FROM THE STATE OF MARYLAND

    Senator Cardin. Thank you, Madam Chair.
    Let me thank our witnesses today.
    I would ask unanimous consent that my entire statement can 
be placed in the record.
    Let me just summarize by saying clean energy is important 
for this country for many reasons. We know it is important for 
national security as we become energy self-sufficient here in 
America. It is important for our environment. We know the 
impacts of global climate change and carbon emissions.
    But it is also important for our economy. This is where the 
growth in jobs will be in America. GE understands that, 
Honeywell understands that, Motorola understands that, DuPont 
understands that, and they are prepared to move forward with 
new technologies in energy creating jobs here in America and 
saving jobs here.
    The difficulty is we have to have a level playing field, 
and we don't have a level playing field today because for dirty 
energy we don't calculate the true costs. We don't put into the 
cost equations the health dangers that are created by the 
pollution. We don't put into the equations the environmental 
damage that is being done, the clean up that will be required 
in cleaning up our air and cleaning up our water. And we don't 
put in that the fact that there are built-in subsidies today 
for dirty energy that new technologies clean energy does not 
enjoy.
    That came home to me, Madam Chairman, when BP Solar, a 
company located in Frederick, Maryland, doing very well in 
solar energy, was planning an expansion in Frederick. But 
because of the economic incentives, they took that expansion to 
Spain rather than America, and we lost those jobs because we 
were not as aggressive as we should have been in moving 
forward, as other countries are doing today. We don't want to 
be left behind.
    Let me just point out I come from a proud manufacturing 
State. Maryland, and particularly Baltimore, has a rich history 
as a manufacturing hub, and we want to have a future in 
manufacturing in our community. And when I take a look at the 
turbine propellers, the motors, the towers, the transmission 
lines that are going to need to be developed, it is an 
opportunity for us to save and expand manufacturing jobs in 
America by expanding clean energy technologies. So I am bullish 
on clean technology for clean energy. I think that is where we 
are going to be having the job growth in America.
    I was proud to be a supporter of President Obama's American 
Recovery and Reinvestment Act. This committee worked very hard 
on that Act. Madam Chairman, you were critically responsible 
for many of the provisions that were included in that Act that 
dealt with moving forward with our infrastructure, including 
our infrastructure to improve technology for clean energy.
    Now, if I might, just yesterday, the Department of Energy 
announced $2.4 billion of grants from the recovery fund 
supporting the development and manufacturing and the next 
generation of batteries in electric vehicles. Now, part of 
those funds are going to go to a General Motors in White Marsh, 
Maryland. Now, here is a facility that has a future, but now 
has a much brighter future in keeping jobs in Maryland. We have 
lost manufacturing jobs in my State. That recovery bill is 
going to create jobs in my State and a good future for the 
people of Maryland.
    And, by the way, we are going to develop the type of 
battery power and electric power so that we can have the next 
generation of vehicles in America that can compete anywhere in 
the world and help us with an energy policy that makes sense 
for our country. It is good for our environment, and it is 
also, by the way, good for our economy.
    Thank you, Madam Chairman.
    [The prepared statement of Senator Cardin follows:]

                 Statement of Hon. Benjamin L. Cardin, 
                U.S. Senator from the State of Maryland

    Competition and innovation have always been a driving force 
behind the American economy. Our market based economy, coupled 
with sound and thoughtful business regulation, has fostered 
invention and created a profitable domestic market for 
entrepreneurs, across business sectors, to work within.
    However, somewhere along the line we let the opportunity to 
play an early leadership role in clean energy technology 
development and production pass us by.
    This is largely due to a national energy policy that has 
not fostered competition and innovation the way American 
business policy does for other sectors of the economy.
    Our Nation's energy policy has subsidized the fossil fuel 
industry for years creating an unfair advantage in the 
marketplace for dirty fuels over clean energy alternatives. 
Some would argue that this has helped keep energy costs low. 
However, the market price for so-called ``cheap'' fuels, like 
coal and gasoline, does not take into consideration the full 
cost of these fuels, be it to the environment, to the public's 
health or the taxpayer.
    The full cost of dirty fuels is realized by consumers 
indirectly in the form of higher healthcare cost because of 
increased incidence of respiratory and pulmonary diseases 
associated with breathing dirty air, which in turn raises 
insurance premiums. We pay for it in our water bills because of 
coal and oil extraction's impacts on water quality that 
ultimately needs to be treated. We also pay for subsidies, 
cheap land leases, and environmental remediation through our 
taxes. If the energy production playing field were leveled, 
differences in cost would hardly be a factor in this debate.
    While Congress continues to debate the merits of creating 
thousands of jobs in a new, clean energy economy, American 
companies like General Electric, Honeywell, Motorola and DuPont 
stand at the ready to produce clean technologies once the U.S. 
market becomes a viable place to market their clean 
technologies.
    I am not impressed by big oil funded studies claiming 
incentives for clean energy development will cost America jobs. 
I can tell you that Maryland is losing jobs because we have NOT 
made clean energy a national priority.
    In May 2007 BP Solar's headquarters, located in Frederick, 
Maryland, employed 2,000 workers in my State. A year after 
breaking ground on the second expansion of their Frederick 
headquarters, BP Solar altered its plans. The company decided 
to scale back its Maryland operations and move its 
manufacturing facility to Spain where government programs 
create greater incentives for renewable energy companies to do 
business.
    While Europe, China, Japan, the Middle East and other parts 
of the world increase their investment in clean energy 
technologies it seems abundantly clear that the next frontier 
of technological innovations is going to be in clean energy 
development, and we can either help our country lead the way or 
watch the world pass us by.
    For many regions of the country, particularly in the rust 
belt and the manufacturing plants of the Midwest, the economic 
downturn has been going on a lot longer than just the last few 
years. Manufacturing of clean energy components ranging from 
wind turbine propellers, motors and towers to solar 
photovoltaics, glass, frames, mounts, conduit and transmission 
lines are just some of the products that will need to be mass 
produced as we move toward a clean energy economy.
    Fortunately, there are positive signs that legislation 
passed early this year is helping move us toward a clean energy 
economy now. Yesterday, the Department of Energy announced that 
$2.4 billion in Recovery Act funds aimed at supporting the 
development and manufacturing of the next generation of 
batteries and electric vehicles was sent out. This is welcome 
news to Baltimore County, Maryland, where workers at General 
Motors' White Marsh facility, which has had its share of 
struggles in recent years, will employ workers to produce 
critical clean transportation technologies.
    Existing facilities in Michigan, Pennsylvania, Ohio, 
Indiana and in Maryland (Baltimore in particular) that are 
relics of a bygone manufacturing era can be retrofit to build 
clean energy products and bring life back to old manufacturing 
communities. That is why the United Steelworkers, with whom I 
met in my office a few weeks ago, support clean energy 
legislation that creates and protects new manufacturing 
opportunities for the United States. They also see the 
opportunity to build clean energy products not just for the 
U.S. market but for the world.
    Addressing the challenge of global climate change is a 
Herculean task. So is righting the American economy. The 
urgency to do both, however, can provide the spark needed to 
transform the Nation to a clean energy economy.
    Thank you, Madam Chairman, for holding this hearing, and I 
look forward to the testimony of our witnesses.

    Senator Boxer. Thank you, Senator.
    Senator Whitehouse.

         OPENING STATEMENT OF HON. SHELDON WHITEHOUSE, 
          U.S. SENATOR FROM THE STATE OF RHODE ISLAND

    Senator Whitehouse. Thank you, Madam Chair. You have 
assembled a very distinguished panel of witnesses, and I think 
I may be the last person between us and them, so I don't want 
to go on. But I do want to emphasize very briefly some of the 
points that the distinguished Senator from Maryland made.
    The first is how very important it is that we reset our 
economy toward a clean energy future. The consequences of 
failing to do that are manifold. There are national security 
consequences, economic consequences, jobs consequences, quality 
of life consequences, environmental consequences, and they are 
all going to become very real for our children and 
grandchildren if we fail to act.
    But the second and related point that I want to leave us 
with is that I don't believe that our present status quo is 
some ideal state of nature from which any variation is an 
anomaly or an interference. The status quo right now is riddled 
with Government hand on the levers of our economy. It just 
happens to put those hands in places that benefit dirty, 
polluting industries. And to move Government's hand in a way 
that supports a better clean energy future is not a disturbance 
in the state of nature that some of my colleagues appear to 
presume the status quo represents; it is actually just making 
better decisions with the same Government power we use right 
now.
    Right now, Government's hand provides incentives to 
pollute. Right now, Government's hand creates a failure in this 
country to meet the international market that exists for clean 
energy incentives and investment. Right now, Government's hand 
lays subsidies all over dirty fuel. So, really, all we are 
doing is resetting something that we have just set in the wrong 
place, rather than taking an ideal market and adding Government 
interference, and I just think that is a kind of basic fact we 
need to acknowledge in this debate.
    I appreciate the hearing and will be delighted to get to 
the witnesses.
    Senator Boxer. Thank you, Senator, very much.
    So now we turn to our panel. The title of today's hearing, 
in case we forgot, is Climate Change and Ensuring That America 
Leads the Clean Energy Transformation.
    We will hear first from Hon. Jon Wellinghoff, Chairman, 
Federal Energy Regulatory Commission, otherwise known as FERC.

  STATEMENT OF HON. JON WELLINGHOFF, CHAIRMAN, FEDERAL ENERGY 
                     REGULATION COMMISSION

    Mr. Wellinghoff. Thank you, Chairman Boxer. If I could have 
my full written remarks placed in the record, I will summarize 
from them.
    Senator Boxer. Yes.
    Mr. Wellinghoff. Chairman Boxer, Ranking Member Inhofe, and 
members of the committee, thank you for the opportunity to 
speak here today.
    The Federal Energy Regulatory Commission and many States 
are using their existing authorities to remove barriers to the 
development of low carbon renewable resources to encourage 
greater efficiency in the electric system. These efforts are 
helping to reduce the emissions produced by the generation of 
electricity.
    Our Nation, however, has a much greater ability to reduce 
emissions from the usage of electricity. Studies indicate we 
could add hundreds of gigawatts of renewable energy resources 
by 2030. In addition, a study issued last week by McKinsey & 
Company indicated that on an economy-wide basis, energy 
efficiency alone could reduce our overall energy usage by 
nearly 25 percent.
    A major reason why low carbon renewable resources and 
energy efficiency are not used more extensively is that 
greenhouse gas emissions are, in economic terms, an 
externality. For example, energy marketplace takes little or no 
account of the fact that certain types of coal production 
currently cause significant emissions of greenhouse gases, 
while resources such as wind turbines and energy efficiency do 
not.
    Climate change legislation can change this. This 
legislation is a way to recognize in the energy marketplace the 
effect of greenhouse gases. Doing so will encourage more energy 
efficiency and the use of low carbon renewable resources, 
allowing us to reduce our greenhouse gas emissions while 
maintaining our quality of life.
    Let me describe some of the Commission's efforts to reduce 
barriers to renewable energy development.
    The Commission has limited the charges imposed on wind 
generators and other variable resources for deviating from the 
amount of energy they schedule to delivery to the grid, because 
these resources often have limited ability to control their 
output. While we have also approved rates to fund the 
development of transmission facilities needed to deliver 
resources such as hydroelectric power from Canada and wind 
power from the upper Midwest and from Montana and Wyoming. 
However, I would note it is highly unlikely that all of the 
transmission facilities needed to deliver the output of 
renewable resources will be constructed without additional 
Federal planning, siting, and cost allocation authority.
    The Commission also is supporting the development of 
emerging hydrokinetic energy technologies, which use the power 
of ocean waves, tides, river currents to generate electricity. 
In April 2009, the Commission and the Department of Interior 
signed an agreement clarifying each agency's jurisdictional 
responsibilities for leasing and licensing renewable energy 
projects on the U.S. Outer Continental Shelf. This agreement 
will facilitate the development of offshore hydrokinetic 
projects, as well as wind and solar projects. Similarly, we 
have signed agreements with the State of Washington and the 
State of Oregon to coordinate the review of hydrokinetic 
projects in the waters off those States.
    In addition, the incorporation of consumer energy use 
management, also called demand response, into the operation of 
the electric grid will reduce both consumer costs and carbon 
footprint of our electric supply. The Commission has required 
the country's regional transmission organizations and 
independent system operators to make filings that will 
ultimately reduce barriers to demand response. The Commission 
also recently issued a national assessment of demand response 
potential after the year 2019.
    That assessment found the potential for peak electricity 
demand reductions across the country is as much as 188 
gigawatts, up to 20 percent of our national peak demand. These 
savings, if realized, can reduce carbon emissions by over a 
billion tons annually.
    Finally, Congress recently tasked the Commission to adopt 
smart grid standards. Last month, the Commission identified 
several priorities for the development of standards for smart 
grid technologies. The Department of Energy and the National 
Institute of Standards and Technology also have major roles in 
the development of smart grid and we are working closely with 
those agencies and with States in collaboratively fostering our 
deployment of smart grid technology.
    In conclusion, the Commission is using its statutory 
authorities aggressively to eliminate barriers to renewable 
resources and consumer energy use management, and to encourage 
greater efficiency in the electric energy system. But those 
efforts and the efforts of other Federal and State agencies, 
while helpful, are not enough to prevent the growing 
accumulation of greenhouse gases in our atmosphere. Climate 
change legislation is the key to altering this trend. This 
legislation will also set an example for the leadership of 
other countries and help our Nation change from an importer of 
energy to an exporter of energy technology. Congress should 
enact this legislation now.
    Thank you again for the opportunity to testify today. I 
would be happy to answer any questions you may have.
    [The prepared statement of Mr. Wellinghoff follows:]
    
  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   
    
    
    
    
    
    Senator Boxer. Thank you so much.
    Our next speaker will be Hon. David Sandalow, Assistant 
Secretary for Policy and International Affairs at the U.S. 
Department of Energy. Welcome.

 STATEMENT OF HON. DAVID B. SANDALOW, ASSISTANT SECRETARY FOR 
               POLICY AND INTERNATIONAL AFFAIRS, 
                   U.S. DEPARTMENT OF ENERGY

    Mr. Sandalow. Thank you, Chairman Boxer, Ranking Member 
Inhofe, and members of the committee. Thank you for the chance 
to testify today.
    I have traveled to China twice in the past 2 months. During 
those trips, I have seen the impressive investments that 
country is making in clean energy. Chinese companies are 
investing in advanced clean coal technologies. They are 
developing huge wind farms. They are building ultra-high 
voltage long distance transmission lines, and they are 
launching electric vehicle programs in 13 major cities.
    In Europe, sustained investments in clean energy have 
helped create widespread economic opportunities. Denmark, with 
a land area less than West Virginia and a population smaller 
than Chicago's, is the world's leading producer of wind 
turbines. The Danish wind turbine manufacturing industry 
employs more than 20,000 people and earns more than $4 billion 
each year.
    Germany and Spain are the world's top installers of solar 
photovoltaic panels, accounting for nearly three-quarters of 
the global market, worth $37 billion last year.
    In Brazil, more than half of the gasoline supply has been 
replaced with ethanol made from sugar cane, and more than 80 
percent of the cars sold in Brazil last year were flex fuel.
    Madam Chairman, the world is on the cusp of a clean energy 
revolution. Whether the United States is a leader or laggard in 
that revolution depends on decisions we as a Nation make in the 
months and years ahead.
    The Obama administration has started to lay a strong 
foundation. The American Recovery and Reinvestment Act provides 
more than $80 billion of clean energy investments, expected to 
create hundreds of thousands of new jobs. This includes $11 
billion to make our electric grid more efficient, $5 billion to 
weatherize low income homes, and $3.4 billion to accelerate 
deployment of carbon capture and storage technologies.
    In May, President Obama announced the largest improvement 
ever in the fuel efficiency of the vehicle fleet, and just 
yesterday, as Senator Cardin has described, President Obama 
announced $2.4 billion of investments in American battery and 
electric vehicle industry, which will result in thousands of 
jobs while reducing our dependence on oil.
    But these steps will not be enough. Transforming our energy 
economy will require comprehensive energy legislation to drive 
sustained American investment over a period of decades. As my 
boss, Energy Secretary Steven Chu, has said, we must get in the 
game and play to win.
    We should start with energy efficiency. Today, American 
families and businesses are burdened with energy waste. A 
McKinsey study, cosponsored by DOE and released last week, 
identifies potential efficiency opportunities available that 
could reduce fossil fuel emissions by the year 2020 by more 
than 10 percent, while saving the economy $700 billion. Let me 
repeat that. While saving the economy $700 billion.
    As we work to improve this efficiency, we should also work 
to enhance our renewable resources. A recent DOE report 
concluded that with major national commitment to clean energy, 
wind could provide 20 percent of electricity by 2030. Our solar 
resources are also extraordinary.
    The challenge we face is to harness these resources and 
grow our economy in the 21st century. Renewable energy presents 
a once in a generation business opportunity.
    Now, as we accelerate this new industrial revolution, coal 
will remain an important part of our energy mix. We should also 
make full use of this domestic asset, but do so in ways that 
allow us to meet our energy needs, minimize environmental 
impacts, contribute to national security, and compete in global 
markets. Carbon capture and storage technologies offer an 
important path to achieving those multiple goals.
    Today, nuclear power provides 20 percent of our electricity 
and 70 percent of our carbon-free electricity. The Obama 
administration is committed to restarting the domestic nuclear 
power industry. It is working on $18.5 billion in loan 
guarantees for nuclear power plants. A cap-and-trade mechanism 
as part of comprehensive legislation provides important 
advantages for nuclear power in the competition against other 
energy sources that emit greenhouse gases.
    Natural gas is another fuel with great potential to aid the 
transition to a clean energy economy. In the past several 
years, due to technological advances, our recoverable reserves 
of natural gas have more than doubled in this country.
    Now, last month the House passed historic comprehensive 
clean energy legislation. The Obama administration strongly 
supported House passage of the bill, which would help position 
the United States as a global leader in clean energy. Your 
chamber now holds the pen, and the Administration looks forward 
to working with you to swiftly enact strong legislation that 
will reward efficiency and clean energy innovation. Working 
together, we can enact legislation that ensures economic 
recovery, creating millions of good new jobs, while laying the 
foundation for a clean energy future.
    I ask that my entire statement be put in the record and 
thank you, Madam Chairman, for the opportunity to participate 
in this hearing.
    [The prepared statement of Mr. Sandalow follows:]
    
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    Senator Boxer. Thank you so very much.
    Next we will hear from Hon. Thomas Strickland, Assistant 
Secretary for Fish, Wildlife, and Parks, U.S. Department of 
Interior, speaking on behalf of Interior Secretary Ken Salazar.

STATEMENT OF HON. TOM STRICKLAND, ASSISTANT SECRETARY FOR FISH, 
      WILDLIFE, AND PARKS, U.S. DEPARTMENT OF THE INTERIOR

    Mr. Strickland. Thank you, Chairman Boxer, Ranking Member 
Inhofe, and members of the committee. On behalf of Secretary 
Salazar, I am pleased to be here to speak about the work 
underway at the Department of Interior to transform our energy 
economy to one based on clean and renewable natural resources. 
I thank you, and the Secretary does, for your leadership on 
this important issue.
    We are entering a new day for energy production and use in 
the United States, a time of increased renewable energy from 
domestic sources and more efficient use of energy from all 
sources. Together, these are the foundation of a clean energy 
era that will improve the environment and create jobs. As 
President Obama has said, there is a choice before us: we can 
remain the world's leading importer of oil or we can become the 
world's leading exporter of clean energy.
    The Department of Interior has the responsibility of 
managing approximately 20 percent of America. These lands not 
only contain some of our most treasured landscapes and historic 
sites, but also some of our most productive energy areas.
    Up until recently, the focus of this energy production has 
been on conventional energy resources, including oil, gas, and 
coal. To be sure, the continued development of these resources 
is essential to our energy security. But we also have enormous 
potential for renewable energy development on our public lands. 
And under the leadership of President Obama and Secretary 
Salazar, we are aggressively pursuing these opportunities.
    We have prioritized the development of renewable energy on 
our public lands and the OCS. Bureau of Land Management has 
identified over 20 million acres of public land with wind 
energy potential in 11 western States and over 29 million acres 
with solar energy potential in 6 southwestern States. There are 
also over 140 million acres of public land in western States 
and Alaska which yield thermal resource potential as well as 
significant biomass potential on Federal lands.
    These public lands have the potential to produce a total of 
2.9 million megawatts of solar, enough to power eight times the 
total number of U.S. households, 206,000 megawatts of wind, 
enough to power 62 million homes; and 39,000 megawatts of 
geothermal energy. There is also significant wind and wave 
potential on our offshore waters. The National Renewable Energy 
Lab, a Department of Energy national laboratory, has identified 
more than 1,000 gigawatts of wind potential off the Atlantic 
coast and more than 900 gigawatts of wind potential off the 
Pacific coast.
    The American business community is responding, as Mr. 
Sandalow indicated. On June 23, 2009, Department of Interior 
announced five limited leases to construct meteorological 
towers in support of offshore wind energy development off the 
coasts of New Jersey and Delaware, the first of their kind ever 
offered by the Federal Government. Companies are also investing 
in solar facilities in the Southwest and wind and geothermal 
energy projects throughout the West.
    At the same time we are concentrating on the development of 
our renewable energies, we are also maintaining our production 
of oil and gas. Currently, the Outer Continental Shelf acreage 
produces 15 percent of America's domestic natural gas and 27 
percent of our oil.
    In sum, we have abundant clean renewable energy resources 
on public lands and off our coasts, which taken together will 
provide a substantial portion of our energy portfolio by 2020 
and beyond.
    Renewables are not the only way to reduce our carbon 
emissions. We can store carbon both in the ground and in 
plants, and the Department is actively pursuing the work 
necessary to make that technology a reality through geologic 
carbon sequestration and biological carbon sequestration. Under 
congressional leadership in the 2007 Energy Policy Act, the 
Department is developing the methodologies and standards to 
accompany these efforts on a commercial scale.
    The BLM is working with the Department of Energy on 
regional partnerships that promote carbon sequestration 
demonstration projects and promoting these efforts on public 
lands. The BLM is currently active in two demonstration 
projects, a deep saline sequestration project in Farmington, 
Utah, and an enhanced coal bed methane project in New Mexico's 
San Juan Basin.
    Saving America's treasured landscapes through landscape 
scale conservation efforts will be one of the major 
contributors our public lands will make to the carbon reduction 
efforts. The carbon reduction potential produced by the 
biological sequestration of carbon plants and soils taking up 
and storing carbon in many ecosystem types, including but not 
limited to forest, grasslands, and wetlands, has not yet been 
fully quantified but could be virtually endless. We have a 
number of demonstration projects, in fact, throughout the 
country focused on these particular efforts.
    The experience of our land managers in pursuing these 
projects is part of our broader ecosystem responsibilities, and 
that should be useful to the committee as you develop an offset 
program that credits verifiable carbon reductions that are 
associated with environmentally sound land management policies 
on private lands.
    In conclusion, Madam Chairman, a problem as complex as 
climate change takes the coordinated efforts of all the 
branches of the Federal Government, cooperation with States and 
localities, and collaboration with leaders from around the 
world. The Department of Interior is prepared to play a leading 
role in this effort.
    I would also like permission to have my written remarks 
added to the record.
    Senator Boxer. Without objection, we will.
    [The prepared statement of Mr. Strickland follows:]
    
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    Senator Boxer. Thank all of you. You know, when Senator 
Inhofe went through what happened since we changed the gavel 
here from Senator Inhofe to myself, he left out a couple of 
things that I wanted to make sure we looked at. One was the 
Supreme Court ruling that carbon is a pollutant covered by the 
Clean Air Act, and the subsequent action by the EPA, very 
important action, that built on the work of the Bush 
administration that we knew, through hearings, had been there, 
which is to take the first steps toward an endangerment 
finding. And under the Clean Air Act, we have got to protect 
our families from pollution.
    So here we are at a circumstance where the Supreme Court 
ruled that carbon is in fact covered by the Clean Air Act. The 
first steps to the endangerment finding have been made.
    The other thing that happened that Senator Inhofe didn't 
mention is we did change Presidents.
    So now you have a circumstance where you have a court, the 
highest court in the land, saying once there is an endangerment 
finding, clearly, we have to act, and we have a President who 
believes that this is an economic opportunity.
    So my question to any of the three of you that would like 
to engage in it is this. One way or another, we are going to 
have to lessen the carbon in the atmosphere. It is either 
through the Clean Air Act or through some flexible legislation 
that we are all looking at. The House has passed a version of 
it which gives tremendous flexibility.
    Now, my colleagues on the other side, I think I wrote it 
down, one of them said, it is a tax and cap scheme. I don't 
know of any taxes in it whatsoever and, as far as I know, there 
will be lots of tax credits in it to help our consumers.
    So my question is, one way or another, we are going to have 
to address carbon pollution. Do you feel the flexibility that 
we could put together in a well crafted bill would make it 
better for businesses and our consumers and create more jobs?
    Mr. Sandalow. Without question, Madam Chairman. And I would 
just start by focusing on the energy efficiency opportunities 
that this country faces. Right now, American families and 
businesses are burdened with energy waste. It is like trying to 
run a race with an iron ball chained to your foot. There is so 
much that we can do as a Nation to improve our competitiveness 
simply by using energy more efficiently. The study that several 
of us have referred to says that we can save $700 billion a 
year in the next decade. That is not a small amount of money.
    I was talking recently to a glass manufacturer who 
described to me how his company has made glass that would save 
lots of energy, but he can't move it because of the structure 
of the real estate markets. He can't sell this glass, which 
costs a little bit more, because contractors have an incentive 
only to put in low bids. So that is the type of problem that we 
need to overcome with things like codes that are in the bill 
that came out of the House in order to solve this problem of 
all the energy waste in our country.
    Senator Boxer. Anybody else wish to comment?
    Mr. Wellinghoff. Madam Chairman, I would add to that. I 
think one of the most important things about cap-and-trade is, 
in fact mechanism, and I think we need to move to market 
mechanisms to solve our problems, but to do that we need to 
ensure that those markets are structured correctly. So I think 
that that is what we are attempting to do, is correctly 
structure the market in ways that we internalize the 
externalities to ensure that the market will make the right 
selections.
    Mr. Strickland. And I would just add, Madam Chairman, that, 
as part of the whole calculus to make all this work, we need to 
have adequate sources of renewable energy, and we believe we 
have that now in a variety of areas. Again, in the public 
lands, we have a huge backlog of applications for solar 
projects. We used some of the Recovery Act money to establish 
four offices through the Southwest to accelerate the process of 
these solar applications and enable Secretary Salazar to put 
forth regs for the development of wind on the Outer Continental 
Shelf, which is a huge potential resource.
    Senator Boxer. OK. I also wanted to point out that, under 
the analysis of the House bill, it is projected that 161 new 
1,000-megawatt nuclear power plants would result from that bill 
as a result of putting a price on carbon there through the 
market. Senator Alexander urges the building of 100 new nuclear 
power plants, and we believe that would cost ratepayers $70 
billion a year. So I believe that anyone who is very fervently 
for nuclear power should be for this type of global warming 
legislation, because it will spur more nuclear power and 
ratepayers will be assisted through tax credits.
    So I am confused as to why some of the proponents of 
nuclear power are missing this point, and I guess I would like 
to ask Mr. Wellinghoff if he has seen that analysis, because 
you get more nuclear power plants, it costs the ratepayers far 
less, and most of the nuclear power companies I know are 
supporting this legislation.
    Mr. Wellinghoff. Yes, Madam Chairman. I haven't seen that 
specific analysis, although I think I have seen some reports of 
it. And, again, I think it comes back to market mechanisms. To 
the extent that you make fossil fuel generation more expensive 
and nuclear power less expensive, then ultimately it is going 
to drive those technologies into the market.
    Senator Boxer. Thank you.
    Senator Inhofe.
    Senator Inhofe. Thank you, Madam Chairman.
    First, before I start out, I have some unanimous consent 
requests to make. Last week, you inserted in the record a 
statement refuting the study by the Spanish Professor Alvarez 
on the green job study, and I would like to insert into the 
record that study and also his response to your statements 
about that.
    Senator Boxer. Sure. And we will put ours back in there as 
well so they can be side-by-side.
    Senator Inhofe. And then we will put one in, too.
    Senator Boxer. Yes.
    [The referenced document follows:]
    
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    Senator Inhofe. Also, since you made the statement it is 
not a tax, I would like to insert into the record the statement 
by the Chairman of the Finance Committee and a member of this 
Committee, Senator Baucus, who says it is a tax measure, it is 
a tax bill, and the House bill referred to the Committee will 
be automatically referred to the Finance Committee as a tax 
bill into the record.
    Senator Boxer. Sure. There are tax credits in it, yes, 
Senator. Go ahead.
    Senator Inhofe. OK.
    [The referenced statement was not received at time of 
print.]
    Senator Boxer. We are going to start this clock regardless 
of who puts what in the record. I took it out of my time, so go 
right ahead.
    Senator Inhofe. Let me just ask the three of you. One of 
the consistent things that we keep coming up with, it goes all 
the way back to when Vice President Gore had Tom Wigley ask him 
the question, he said that if we were to pass the Kyoto Treaty, 
and for our discussion purposes, the Kyoto and all the bills 
that were offered in 2003, 2005, and 2008 are essentially cap-
and-trade bills.
    Wigley came out with the response that what would happen if 
all developed nations would live by the emission requirements 
of Kyoto. He said it would reduce the temperature by not more 
than seven one-hundredths of one degree Celsius. Then we had, 
just the other day, Chip Knappenberger, an environmental 
scientist in the New Hope Environmental Services, came out with 
the same thing. He came out with it would reduce it by one-
tenth of one degree. Then Lisa Jackson said it wouldn't reduce 
it at all.
    So I want to ask each panel member do you think, if we were 
to pass the Markey bill as it is today, that it would have the 
effect of reducing the CO2 worldwide? Real quickly.
    Mr. Sandalow. I do, Senator Inhofe. I think the analyses 
you are citing assume that America won't lead and that America 
won't innovate. As I travel around the world, what I hear is 
the rest of the world is waiting for the United States to take 
strong steps and eager to follow American leadership in this 
area, and so many others. And I also believe in American 
entrepreneurial spirit and our ability, once entrepreneurs get 
strong signals from this city, to move forward.
    Senator Inhofe. We are running out of time here.
    I think that this is an honest difference of opinion 
because we have all the statements from people, from the 
officials in India and China and elsewhere, that say, no, we 
are not going to do it. But again, anyone else want to respond 
to that question?
    Secretary Strickland, do you think it is going to reduce 
the overall CO2 if we pass this thing?
    Mr. Strickland. I am not a scientist, Senator, as you know, 
and I don't have the scientific background to be able to offer 
my own independent judgment. I support the position of the 
Administration with respect to the goals of that.
    Senator Inhofe. We have heard, time and time again, that 
America possesses just 3 percent of the world's oil reserves 
and that we use 25 percent of the world's oil. Yet, that 3 
percent number refers only to the Nation's 21 billion barrels 
of proven reserves. Now, to prove reserves, you have to drill, 
and if you can't drill, then you can't prove the reserves. 
Eighty-three percent of America's Federal onshore lands are 
either inaccessible or restricted due to our policies here. 
Eighty-five percent of the offshore continental United States 
is still off limits.
    Now, a more honest assessment combines our 21 billion of 
proven reserves--Senator Barrasso talked about this--with the 
MMS, the BLM, the USGS estimates of undiscovered technically 
recoverable oil resources. That shows American oil resources 
equal to 149 billion barrels of oil, or 7 times the number 
cited by the Democrats, and those are conservative Government 
estimates.
    And he would say don't forget coal that is methane hydrates 
and oil shale. The Rand Corporation estimates up to 1.1 
trillion recoverable barrels of oil from oil shale in the Green 
River formation, Colorado, Utah, Wyoming. To put that into 
perspective, 1.1 trillion barrels equals more than 2,000 years' 
worth of imports from Saudi Arabia.
    So I think it is clear that we have these resources, and I 
would say this. In the statement that you made saying there are 
two alternatives--this is your statement, Secretary 
Strickland--you said either we can remain the world's leading 
importer of oil or we can become the world's leading exporter 
of oil. I think there should be a third one, and that is 
develop our own resources. We are the only country in the world 
that doesn't develop our own resources.
    I guess the question I would have is do you agree with 
these analyses? Do you think we ought to develop our own 
resources? Let's start with you, Secretary Strickland.
    Mr. Strickland. It is the position of the Administration--
and Secretary Salazar supports this position, as do I--that we 
should actively and aggressively develop our conventional 
energy resources. And since this new Administration came into 
office, January 21, our first day at Department of Interior, we 
have offered just under 2,000 parcels for lease, 2.3 million 
acres. There were bids brought in on 845,000 acres.
    I accompanied Secretary Salazar to New Orleans for one of 
the OCS bids in the spring. We have another bid coming up in 
August with respect to additional offshore lands. We are 
actively looking at the whole OCS in its entirety. We believe 
there is substantial opportunity to continue to develop 
conventional oil and gas. We believe we need a balance. We also 
think there has been an undervalued and underdeveloped 
alternative in renewable resource on our public lands up to 
this point, so we are moving quickly to try and bring some 
balance, but that is not at the expense of our conventional 
commitment. We agree there are additional opportunities.
    Senator Inhofe. Secretary Strickland, I really appreciate 
that response. In fact, I agree with your response. It is an 
all of the above response and I appreciate it. Thank you very 
much.
    Thank you, Madam Chair.
    Senator Boxer. Thank you, Senator.
    Senator Lautenberg.
    Senator Lautenberg. I want to ask a question in response to 
the requests we hear for further development of our own 
resources.
    Mr. Sandalow, if we develop more of our oil and energy 
resources as they are defined today, do we help global warming 
be reduced?
    Mr. Sandalow. The most important steps we can take to fight 
global warming, Senator, are to improve energy efficiency, to 
innovate with new renewable energy sources, to bring in low 
carbon sources. Developing our own fossil resources in an 
environmentally responsible manner in a comprehensive way is 
important for achieving a number of objectives, but the most 
important thing we can do to fight global warming in the short 
term are energy efficiency and then renewable energy 
investments.
    Senator Lautenberg. Energy efficiency. So, therefore, as we 
contemplate touching the abundance of oil and gas in our 
country, we therefore do not automatically control the growth 
of global warming. And I think we ought to stop going through 
this charade and step up to the plate and say, look, perhaps we 
can find some more oil, and we want to reduce our cost for 
living, etcetera, et cetera, but I would ask you this.
    Leading scientists say that the United States must cap 
emissions by at least 20 percent by 2025, and this study that I 
talked about before showed that we can reduce our energy use by 
23 percent by 2020 at little or no cost, using energy 
efficiency. How crucial is it to our long-term objective of 
reducing carbon emissions in our world that we get on the glide 
slope of at least 20 percent by the year 2020?
    I would ask you, Mr. Sandalow.
    Mr. Sandalow. In my view, Senator, it is very important to 
get started. It is important to get started and take the steps 
needed to send the right incentives to businesses and families 
around this Nation. There are such huge opportunities here, and 
what we just need is a consistent and clear policy structure.
    Senator Lautenberg. Mr. Wellinghoff.
    Mr. Wellinghoff. I would agree, and I agree with the 
statements of Secretary Sandalow. It is absolutely essential 
that we start on this, and energy efficiency really is the key, 
because it is the lowest cost resource that we have available 
in this country, and that is why it is important to move this 
into markets and to allow buy a market mechanism like cap-and-
trade to have things like energy efficiency rise to the top of 
our energy resource stack.
    Senator Lautenberg. The International Energy Agency says 
that achieving science-based emissions reductions will require 
an annual global investment--annual global--of $400 billion a 
year on energy research and development. The GAO estimates that 
the U.S. Government spends just $1.4 billion per year on energy 
R&D. How much should our Government be investing in research 
and development to meet our share of this reduction goal?
    Mr. Sandalow. Thank you for the question, Senator. Our 
country, in the past several decades, has under-invested in 
energy research, and under-invested very dramatically. This is 
one of Secretary Chu's top priorities at the Energy Department, 
is to increase our investment in this area in clean energy R&D, 
in bringing the best minds in this country into clean energy 
research. If we do that, we can solve these problems.
    Senator Lautenberg. Mr. Wellinghoff.
    Mr. Wellinghoff. Well, in addition to research, we really 
need to do development deployment, and that is really what we 
are doing at FERC, is trying to develop and deploy the things 
that we need to do to get these strategies in place, such as 
renewables and energy efficiency. So both are important, R&D 
and D&D are important as well.
    Senator Lautenberg. But we are talking about sums of money 
to be invested. Do you agree that we have been far short of 
what we have to do to----
    Mr. Wellinghoff. Yes, absolutely.
    Senator Lautenberg. So one of the things that we have 
established, Madam Chairman, is that at least we are discussing 
global warming like it is real, and not just somebody's 
fictional view of what is happening in our world. Thank you.
    Senator Boxer. Thank you, Senator Lautenberg.
    Senator Alexander is next.
    Senator Alexander. Thanks, Madam Chairman.
    The Chairman mentioned the relative cost of nuclear and 
wind. The National Academies made a very interesting report 
this week on our energy future. They said that the relative 
cost of building a comparable amount of nuclear and wind would 
be about the same. You would have to build 180,000 wind 
turbines to equal 100 new reactors, and that wouldn't include 
the cost of transmission, which must be hundreds of new 
transmission towers, or maybe thousands, for the wind turbines, 
and it doesn't include the cost of backup power, since, after 
you build the wind turbines, you still have to have nuclear, 
coal, or something else for when the wind doesn't blow.
    The Senator from Rhode Island mentioned the hand of 
Government subsidizing dirty energy. That is not true in terms 
of electricity. The biggest subsidies by far go to wind, which 
is 19 times per kilowatt hour times the subsidy for nuclear, 
much more for coal per kilowatt hour, and 30 times even all 
other renewables.
    Mr. Strickland, your Department is sort of the custodian of 
our national landscape, and we are celebrating 100 years of 
protecting it. What are you going to do about 180,000 new wind 
turbines that are 50 stories tall, many of them in the West, 
and thousands of miles of transmission lines? And the solar 
thermal plants that are being built--well, to equal one nuclear 
plant, it would take a solar power plant 30 square miles; that 
is 5 miles on each side. And they tell us in the Southeast to 
use biomass, and I figured that we would have to continuously 
forest and area the size of the Great Smoky Mountains to equal 
one nuclear reactor, and we would have hundreds of trucks 
roaring in and out every day carrying the stuff.
    Some conservationists are talking about a renewable energy 
sprawl. Are you developing any policies to deal with that?
    Mr. Strickland. Senator, we are. Right now, the BLM is 
looking at solar and involved in a programmatic EIS to look at 
just that very point that you make. Rather than just let this 
develop haphazardly with individual projects that come in, 
let's look at where they are best located that takes into 
account some of these environmental issues as well as 
transportation issues. We are looking at transportation 
corridors in the same way we are working with local and State 
governments out in the West. We are working closely with the 
Western Governors' Association. So the idea is to try and take 
into account the very points you make.
    The environmental considerations, I am responsible for a 
big part of the enforcement of the Endangered Species Act. 
There are real issues that we will process and work through.
    Senator Alexander. Well, we wouldn't want to destroy the 
environment in the name of saving the environment.
    Mr. Sandalow, did I remember right--I hope I did--that you 
wrote or told me one time that you thought that, with a 
concerted effort over 20 years, we might be able to electrify 
half our cars and trucks without building a new power plant?
    Mr. Sandalow. That is correct, Senator.
    Senator Alexander. I am hopeful----
    Mr. Sandalow. I just wanted to add I am congratulating you 
for all your work on this topic. I know you bought the first 
plug-in vehicle in the Washington, DC, area, and I want to 
congratulate you on that.
    Senator Alexander. Well, thank you for that. Did I remember 
right, also, did you ever make a computation about how much 
that might reduce our reliance on foreign oil?
    Mr. Sandalow. It can dramatically reduce our reliance on 
oil, Senator, yes. I don't have the numbers at the tip of my 
tongue, but it is quite significant.
    Senator Alexander. You are dealing with policy over there, 
and I have already congratulated Secretary Chu for his interest 
in nuclear power, but what I am struggling with is why do we 
have a renewable energy standard? Why don't we have a clean 
energy standard? The hearing is not about renewable energy, it 
is not about a national windmill policy; it is about clean 
energy. So why are we picking and choosing and subsidizing--why 
do we have a mandate? The Chairman said that we are going to 
build a lot of nuclear plants, but we don't have a mandate to 
do that. We have mandates in effect, and we are proposing more, 
that basically require Tennesseans and people in the Southeast 
to buy wind from South Dakota, which makes no sense, or to 
force us to put 50-story wind turbines on our ridge tops, which 
are our most treasured and sacred places. We don't want to see 
them. When the wind doesn't blow, it doesn't make any sense.
    So why don't we have a clean energy standard or why don't 
we have a base-load clean energy standard and a renewable 
energy standard? Wouldn't that produce a lot more pollution-
free, carbon-free electricity more rapidly?
    Mr. Sandalow. Well, Senator, the bill that was passed out 
of the House contains a very powerful mechanism for doing 
roughly what you are describing----
    Senator Alexander. But it excludes nuclear power.
    Mr. Sandalow. Well, it includes a cap-and-trade mechanism, 
and the cap-and-trade mechanism----
    Senator Alexander. I am asking you about a mandate. We have 
a mandate for wind and solar, really, mainly wind is the 
practical effect. Why not do the same for base-load power?
    Mr. Sandalow. I guess, Senator, the bill, as a whole, 
accomplishes the objectives that you are promoting here. That 
is the point that Senator Boxer has already made.
    Senator Alexander. So we don't need the renewable mandate, 
then.
    Mr. Sandalow. I think it is a helpful part of the overall 
mix. And Senator, I think there is going to be discussion in 
this chamber, and all ideas should be brought forward on this.
    Senator Alexander. Thank you, Madam Chairman.
    Senator Boxer. Thank you, Senator.
    Now, let me see my list here. Senator Merkley is next.
    Senator Merkley. Thank you very much, Madam Chair.
    Thank you for your testimony. As I hear the discussion 
about what we can achieve through increased energy efficiency 
and the amount of renewable energy that can be produced--and 
often it is couched in the time line of 2030. I think some of 
the statistics that were mentioned, Mr. Wellinghoff, I believe 
you said we can produce hundreds of gigawatts of renewable 
energy by 2030; Mr. Sandalow, I believe you said that wind 
could do 20 percent of our energy demand by 2030. Isn't it 
possible to take these factors and weave them into a coherent 
strategy to eliminate our dependence on foreign oil?
    Mr. Wellinghoff. Senator, yes, I believe it is, and I think 
part of it is what the dialogue between Secretary Sandalow and 
Senator Alexander, with respect to moving toward 
electrification of our transportation system; that really is 
the key. If we want to move off of foreign oil, we have to 
electrify that transportation system and ensure that we have 
the clean, reliable electric energy to provide that energy for 
the transportation system. But I think it is very doable, yes.
    Mr. Sandalow. I would strongly agree with Chairman 
Wellinghoff and just highlight the announcements made 
yesterday. More than $2.4 billion of grants under the Recovery 
Act to promote exactly this. I think it has the potential to be 
transformational in terms of our country's reliance on oil. 
This is the future.
    Senator Merkley. Mr. Strickland, do you want to add to 
that?
    Mr. Strickland. No, I totally agree with that, and I think 
that heretofore, just within the Department of Interior, there 
had not been active efforts to look at our public lands, 
inventory them, put a regulatory framework in place to 
accelerate permitting so that we could actually access and 
develop those renewable resources that are there, as well as 
the transmission piece, which Chairman Wellinghoff was speaking 
to. We need to get these pieces in place, the basic 
infrastructure, to help facilitate the development of our 
renewable resources, which are just there.
    Senator Merkley. So I think I just heard three yeses to the 
question of could these be woven together, energy efficiency 
and renewable energy, to eliminate our dependence on foreign 
oil. I think it would be really helpful to have the 
Administration lay out just such a more detailed strategy, 
because it is a huge challenge to this country to be dependent 
upon a few nations for foreign oil. It is a huge cost to be 
spending $2 billion a day on foreign oil, and we could create a 
lot of jobs by spending that money here in the United States.
    And then we really have a vision that we could lay out to 
the American people of a triple win, triple win on national 
security, on creating jobs here, and a triple win, the third 
being reducing the carbon dioxide in our atmosphere and good 
stewardship of our planet, leadership and stewardship of our 
planet.
    So I just want to encourage you all to work to try to 
present that. The year 2030 is well into the future, but maybe 
when the numbers are crunched and we see what could be produced 
by all the investments being made, it could be done in a much 
shorter period.
    I wanted to specifically pursue the comments about the 
electrification of our passenger transportation, and I applaud 
Senator Alexander for his work in this area. I have heard 
statistics along the lines that if we were to have all of our 
cars produced in the near future able to go 30 miles on simply 
electricity, and have braking systems, regenerative braking 
systems to recapture the energy loss when you slow down a very 
heavy vehicle, that we could reduce by 80 percent the carbon 
dioxide generated by car transportation.
    Are these numbers in the right area, or do you have better 
numbers? And would it be feasible to have an aggressive 
strategy in which we basically say, at some date in the future, 
indeed, every new car produced in America will have to go 30 
miles on electricity, have regenerative braking, and attempt to 
really drive the huge savings in fuel, which contributes to the 
national security issue, and in the reduction of carbon 
dioxide?
    Mr. Sandalow. There is no question that the savings can be 
very substantial, Senator Merkley. That is for two reasons. 
First, electric motors are much, much more efficient than 
standard internal combustion engines; and second, they allow us 
to tap in to low carbon energy sources such as wind or solar or 
nuclear. So the carbon emissions from a fleet that is 
electrified is going to be much less.
    You mentioned 2030. Around that time, maybe I will be a 
grandfather, and I think someday my grand-kids are going to 
look at my kids and say, what, you mean you didn't plug in cars 
when you were young? I think they are going to think that is as 
odd as not having cell phones today.
    Senator Merkley. Any other comments or thought about that 
effort?
    Mr. Wellinghoff. Yes, Senator Merkley. I think your numbers 
are correct.
    There are actually two very good studies that have been 
done on this issue, one by the Pacific Northwest National Labs 
and another by EPRI and the NRDC jointly that looked at what 
the carbon reductions would be both for automobiles and then 
what the overall carbon reductions would be if we moved to an 
electric transportation system. So definitely there would be 
very large reductions in carbon, and it has been shown that it 
is all feasible utilizing electricity to move that direction.
    Senator Merkley. Thank you all very much.
    Senator Boxer. Thank you.
    Senator Barrasso.
    Senator Barrasso. Thank you, Madam Chairman. I would like 
to defer to Senator Voinovich.
    Senator Boxer. Senator Voinovich.
    Senator Voinovich. Thank you, Senator Barrasso.
    I introduced a bill with Byron Dorgan called NESA, the 
National Energy Security Act, and one of the reasons I did that 
is because of the fact that I have been concerned for a long 
time that we haven't harmonized our energy, our economy, our 
environment, and our national security; and if the public knew 
how vulnerable we were today in terms of oil, they would be 
shaking in their boots.
    It seems to me that today over 60 percent of our oil is 
coming from overseas, and about 60 percent of that is coming 
from the OPEC nations. We send about 240 billion to 300 billion 
overseas to countries that produce this oil. We have no idea of 
the environmental impact that that is having.
    So I thought to myself on many occasions what we should be 
doing as a Nation, from a public policy, security, energy, and 
so forth, is that we should take advantage of all of the 
natural resources that we have, Mr. Strickland; and I talked 
with former Senator Salazar about this, in terms of our own 
oil.
    At the same time, we should be as aggressive as anyplace in 
the world to find a way that we use less oil so that perhaps, 
in a dozen years, we would be out there as the country that is 
least reliant on foreign sources of oil and the country that 
uses oil the least. Then we would be, I think, in terms of 
competitiveness, right up there where we should be.
    So I am glad to know that you are moving forward, and I 
wish the President, when he talks about the issue of becoming 
oil independent, should talk about the fact that not only are 
we going to use less, but we are going to go after those areas 
where we can responsively find oil. And I would like you to 
look at that bill. It is sponsored by many generals, admirals 
who are concerned; it talks about finding more, using less; it 
talks about 2050, that 85 percent of our vehicles would be 
electrified; it talks about the fact, Mr. Wellinghoff, that we 
need the grid. And EPRI says that we are going to need $165 
billion to do the grid, and we need the grid not only for wind 
and solar, but we need it for the rest of the energy that we 
produce here in the country.
    The other thing that I want to comment on is the issue of--
in your testimony, you talked about a major reason why low 
carbon renewable resources and energy efficiency are not used 
more extensively, that the cost of greenhouse gas emission is 
not reflected in the price of energy. To summarize your 
approach, if we simply tax energy more so it costs more and 
never build another coal or nuclear plant, then people would 
use less and switch to less reliable sources.
    Now, that is something that I have a hard time 
understanding. I think you once said that we didn't have to 
build. If we did solar and wind, we wouldn't have to have 
nuclear or we wouldn't have to have coal, or we might not have 
to have gas. And it just defies logic, and I would be 
interested, Mr. Sandalow, in your comment on this. We get 50 
percent of coal, 20 percent gas, 20 percent nuclear, and the 
rest of it is renewable somewhere, as I mentioned in my earlier 
remarks. Eight-tenths of 1 percent solar, 1.4. I have talked to 
the best experts in the world, and they said that you have to 
do all of that. But if you think that some day down the road we 
are going to take care of our energy needs with solar and with 
wind is just plain naive. What is your reaction to that? How 
can you say something like that when the facts are different?
    Mr. Wellinghoff. Senator Voinovich, that is not exactly 
what I said. What I said was, depending upon our ability to 
look at a number of scenarios with respect to the market and 
how the market will operate, it may be possible to bridge to a 
low carbon energy future utilizing a combination of our 
renewable resources, which would include solar, wind, 
geothermal, hydrokinetics, biomass, and energy efficiency and 
demand response and natural gas.
    If you look at that in combination, I think everyone would 
agree, every expert I have seen and talked to would agree that 
it is feasible, depending upon how we structure our markets.
    Senator Voinovich. Fifty years from now, 100 years from 
now? I mean, let's get serious.
    Mr. Wellinghoff. Certainly a transition, there is no 
question about it. But we need to look at things like natural 
gas, for example. In this country, we have probably over 100 
years' worth of natural gas. Secretary Sandalow indicated that 
we have now revised our coal figures. There is probably 100 
years or less of coal. If we look at the two and compare them, 
natural gas, when you burn it, puts out half the carbon that 
coal does. From that perspective, ultimately, it would seem to 
me to make more sense to emphasize a bridge with natural gas, 
combined with energy efficiency and renewable resources, than 
it would to a bridge with carbon-intensive coal. So from that 
standpoint----
    Mr. Voinovich. I am out of time, but I want to make one 
point, OK? You are talking about natural gas. We encouraged our 
electricity to go to natural gas. Our gas prices went up to the 
top. We lost millions of jobs in this country because of the 
high natural gas cost. I had people in my office, Bayer 
manufacturers move jobs from the U.S. because of our high 
natural gas cost. When we did that policy, we didn't pay 
attention to the impact it had on our economy. So all these 
things relate to each other. You can't do this thing in a 
cocoon.
    Mr. Wellinghoff. And I am not suggesting that we do. Our 
natural gas supply resource base has been increased by more 
than 50 percent in the last 3 years. We found vast amounts of 
new natural gas that we never knew existed before. We need to 
look at that, consider that as how it can fit in to the bridge 
of getting into a low carbon society.
    Senator Boxer. Thank you very much, Senator Voinovich.
    Senator Cardin.
    Senator Cardin. Again, thank you, Madam Chair.
    I want to thank the witnesses for their testimony.
    I think we all agree with Senator Voinovich that there is 
not one source that is going to solve our problems for energy 
in America, that we have to look at all the different sources. 
But I would point out I think it is naive not to look at 
renewables and doing a better job with renewables in trying to 
reach our goal of energy security, of having energy reliable 
sources for our economy and leading on global climate change 
and reducing our carbon footprint.
    Several of you have mentioned what is happening in other 
countries. Secretary Sandalow, you specifically mentioned that. 
I guess my concern is whether America is going to wake up one 
day and find the innovations that we came up with, that were 
developed here in America, perhaps even with Government 
support, are all of a sudden being used in other countries and 
literally purchased by other countries, making us once again 
dependent upon energy developed in other parts of the world for 
our own energy needs.
    I will give you just one example. We are developing in 
Baltimore algae-based ethanol. It has promise. If it works, it 
could be a tremendous source of energy, and its carbon 
footprint is negative. That is a new technology. There are 
going to be companies that are going to move ahead on it, 
whether they are here in America or in another country.
    I worry that we may not be doing enough to keep this 
technology here in America with the jobs for the use of that 
technology based in America, rather than based in another 
country. A lot of this is going to be very fungible, and we are 
going to be able to import energy. I don't want to import 
energy; I want to have the energy produced right here in 
America.
    I do applaud, again, the American Recovery and Reinvestment 
Act, the stimulus package. We wanted that to have a major 
impact on this issue, and what the Department of Energy did 
yesterday was a major step forward on electric cars and 
batteries. But I do worry that we may be missing the 
opportunity for allowing our markets to develop the jobs here 
in America.
    Your response?
    Mr. Sandalow. Senator Cardin, in my view, your concern is 
very well founded and borne out by some of our recent history. 
The technology behind the photovoltaic cell was developed here 
in Bell Labs, and now other countries have the lead in 
manufacturing that technology. The technology behind the Prius 
battery was developed with U.S. Government support and is now 
mainly commercialized elsewhere. We need strong policies in 
order to make sure that we develop the technologies of the 
future here and that we keep them here.
    Programs like the one announced yesterday, programs like 
the bill that was passed out of the House are absolutely 
essential to making sure that the United States leads the clean 
energy revolution.
    Senator Cardin. I think Americans would be surprised to 
learn that the Prius technology was developed in America. I 
hear from my neighbors all the time about the Prius. Well, we 
helped develop it. The problem is we didn't keep the technology 
here; we let it slide. Now we are getting back to it. We are 
getting back to it. I think we are taking the right steps right 
now. But I just hope we have the staying power in order to 
accomplish the goal that all of us wants to see, America being 
energy independent in an environmentally friendly way.
    Secretary Strickland, I want to get you on the management 
of public lands for one moment. Public lands are critically 
important for energy production in America. Can you just tell 
us where we are as far as the use of public lands for renewable 
energies and where you see us as far as I hope changing that 
equation, using more of our public lands for renewables?
    Mr. Strickland. Senator Cardin, I think we are in our very 
early stages in terms of using public lands in terms of the 
potential for renewable energy. It was just this spring that 
regulations were, for the first time, put in place to provide 
for the development of offshore wind in the Outer Continental 
Shelf. Now, there was one project, at least, the Cape Wind 
project, that had gone forward with kind of some interim regs. 
At least the application for that project had gone forward. So 
we are very much in our infancy, but we are very much moving 
quickly to put the infrastructure in place.
    With respect to solar, much the same. We have limited 
proposals for solar up until recently. Now we have a huge 
backlog of private sector interest in developing solar on our 
public lands. As I mentioned a few moments ago, we used some of 
our Recovery Act dollars to the Department to put four offices 
in place throughout the Southwest to help deal with that 
backlog so we can get these projects through the permitting 
system, and those that meet the standards for environmental 
review and otherwise make sense and can attract the capital 
will come online.
    So we are early on in this effort, but there is huge 
potential.
    Senator Cardin. Madam Chair, I just want to urge the 
committee--I think it would be good for our committee to have 
information as to the amount of public lands that are being 
devoted to renewable versus traditional mineral extractions. I 
would urge you to ask for that information.
    Senator Boxer. Senator, I would be glad to organize a 
committee letter, and whoever would like to sign it, we will 
make it an official request.
    Senator Barrasso.
    Senator Barrasso. Thank you very much, Madam Chairman.
    Mr. Wellinghoff, you said in April that there is no need to 
build new coal or nuclear power plants in the United States. 
You also said the renewables like wind, solar, and biomass will 
provide enough energy to meet base-load capacity and future 
energy demands. You later said that base-load capacity is going 
to become an anachronism. Ten Senators sent a letter to the 
President in response to your comments. We were troubled that 
the Nation's top power industry regulator would make what I 
believe were reckless and unrealistic comments.
    I am going to ask, Madam Chairman, that that letter be 
submitted as part of the record.
    [The referenced letter was not received at time of print.]
    Senator Barrasso. Secretary Salazar recently testified 
before the Energy Committee, and you talk about Senator 
Cardin's questions about the amount of public land being used 
for renewables. Secretary Salazar testified that 138,000 acres 
of land--138,000 acres of land--would be needed to build a wind 
farm with the capacity to replace one coal-fired power plant. 
Well, that is roughly three and a half times the size of 
Washington, DC.
    But there are hundreds of coal-fired power plants in the 
United States, and I guess the question comes down to are we 
willing to set aside an area three and a half times the size of 
the District of Columbia for a wind farm to replace each one of 
these coal-fired power plants.
    How do you do the math on that?
    Mr. Wellinghoff. First of all, Senator Barrasso, I did 
respond to a question by Senator Voinovich which was very 
similar to your question, that initially I would like to 
clarify. I did not say that we would not need those types of 
facilities, either coal or nuclear.
    What I did say was that, in fact, under appropriate market 
scenarios, I believe it is possible to construct a combination 
of renewable resources which would include not just wind but 
also geothermal. We are finding, for example, much more 
geothermal than we ever knew existed. There are literally 
hundreds of gigawatts of geothermal in geopressure wells in 
Texas that we did not know existed or had the technology to 
extract. We are finding literally hundreds of gigawatts of 
hydrokinetic resources available in our rivers and streams and 
offshore in the oceans and wave energy, as well as biomass and 
other renewables.
    But add to that the 23 percent energy efficiency that 
McKinsey talks about in their study. Add to that the 188 
gigawatts of demand response that we found in our study. 
Combine that with our 100 years of natural gas that we have in 
this country. There is a scenario, I believe, in a market 
construct that could be a least cost scenario for this country 
where we could in fact move to a lower carbon transition 
utilizing just those resources. That is what I said.
    So, in that context, I think there are challenges with wind 
and the land that it takes to put that wind up, but I think 
also Secretary Salazar said there are estimates of 800 to 1,000 
gigawatts of wind off the Atlantic Coast. Again, we have plenty 
of land out there in the ocean to take care of the area that we 
need to ultimately develop that wind. So I think we do have the 
resources, and I think we do have the land area potentially to 
develop it if we look at all the resources and how they can be 
combined together.
    Senator Barrasso. So in terms of Senator Cardin's question 
about how much land is being used for the renewables onshore 
that he just asked for that number, you may want include some 
of those offshore issues as well. Thank you.
    Mr. Strickland, if I could, the President of the American 
Farm Bureau testified before this committee. When he was here, 
he said there would be winners and losers in the agriculture 
community based on Waxman-Markey. You are from the West, the 
Rocky Mountain West in Colorado. Western ranchers whose 
operations, you know, are heavily dependent on the use of 
Federal lands for livestock forage have very limited offset 
opportunities under this bill.
    The ranchers are constrained in the types of grazing 
practices that they can use on Federal land, and Federal lands 
themselves don't really qualify for offset opportunities. So 
the majority of the West if Federal land; half of Wyoming, a 
great portion in Colorado. I am concerned about how the 
agriculture community in the intermountain West could possibly 
survive under Waxman-Markey, given what the President of the 
American Farm Bureau has had to say.
    Why is western agriculture put, to me, at a disadvantage, 
and do you have any solutions for your Department?
    Mr. Strickland. Well, in terms of the issues that we deal 
with relative to access to public lands for agricultural 
purposes, we see that as a continued important value and 
critical to the economy of the West, so we don't believe that 
that is at issue or at risk here. We also believe that there 
are outstanding opportunities for carbon sequestration, 
biological carbon sequestration that involves collaboration and 
cooperation with the agricultural community.
    In fact, Senator Inhofe, I know, has been a leading 
proponent of conservation partnerships, and just earlier this 
week, Senator Inhofe, I was out in Montana and I met with a 
Montana rancher who has sold an easement to his ranch to keep 
it in agricultural production; yet, it helps facilitate very 
important wildlife values on the front range of the Rockies in 
Montana. So very clear examples of how we can partner between 
the public and private sector to advance environmental values, 
and I think there are opportunities along those lines to look 
at biologic sequestration and to work with the agricultural 
community so that those kinds of uses of the land are seen as 
part of the solution.
    Senator Barrasso. Thank you.
    Thank you, Madam Chairman.
    Senator Boxer. Thank you, Senator Barrasso.
    Senator Whitehouse.
    And then we are going to move to our next panel.
    Senator Whitehouse. Thank you very much.
    Secretary Strickland, first of all, thank you for your 
service as a United States attorney. We former U.S. attorneys 
need to stick together. Also, please pass our regards to our 
friend and colleague, Secretary Salazar.
    You just mentioned wildlife. I understand that the wildlife 
adaptation amendments that have accompanied previous Senate 
legislation in the climate change area are gathering broad 
bipartisan and multi-regional support. Is that your observation 
as well?
    Mr. Strickland. It is, Senator. That is a very important 
role, frankly, we believe for the Department of Interior, 
obviously, Department of Agriculture with Forest Service lands 
as well. But the adaptation challenges and issues and 
responsibilities that we have with our public lands and more 
broadly to protect wildlife and to deal with the real world 
impacts of climate change impacts on land and species is 
extremely important, and I know you have shown great interest 
and leadership on this and we would like to work with you on 
this.
    Senator Whitehouse. Very good. Thank you.
    Chairman Wellinghoff, years ago I practiced before the 
Federal Energy Regulatory Commission in an era when electric 
utilities were far more vertically integrated. Since then, we 
have seen them break out into transmission companies, transcos; 
generation companies, gencos; distribution companies, discos; 
and I would like your thoughts on whether we should be trying 
to incent the electric utility industry to move toward 
conservation companies as well, conscos, where their 
conservation efforts can become a profit center for them in 
ways that will offset the diminished sales that are associated 
with conservation.
    Mr. Wellinghoff. I think we absolutely should, Senator. In 
fact, the FERC is doing that at this point in time. We are 
incenting both distribution utilities and private third parties 
to become much more involved in both energy efficiency and 
demand response by incorporating into the wholesale organized 
markets in this country, the ITOs and the ISOs, tariffs that 
allow demand response and energy efficiency to be actually bid 
up into those wholesale markets.
    To the extent we can have those markets open and allow for 
the demand side, as well as the supply side, to participate in 
them, it will encourage both distribution utilities and third 
parties that will aggregate customers and reduce their loads 
and bid that into those markets to reduce the overall costs and 
improve the efficiency of the markets.
    Senator Whitehouse. That is a good price signal into the 
market under existing market structure. My question went more 
to whether we should try to--there have been efficiencies in 
the market that have been captured by the disaggregation into 
transmission, distribution, and generation.
    Mr. Wellinghoff. Right.
    Senator Whitehouse. Should we also be thinking about 
pursing a similar disaggregation so that the conservation 
portion of a utilities portfolio actually has to be separate, 
and therefore more distinct and competitive and go beyond just 
a market signal into the existing market?
    Mr. Wellinghoff. I am sorry, I didn't understand that part 
of it, but, yes, I believe we should. The more we can 
disaggregate and unbundle those services and make them more 
competitive, ultimately, I think the more players will get in, 
the more entrepreneurs will get in who will have more ideas of 
how to do it in a more robust way and will be able to drive 
down costs for consumers. Yes, I would agree.
    Senator Whitehouse. Thank you.
    My last question is to Secretary Sandalow, and it relates 
to nuclear power. Over time, a lot of objection has manifested 
itself to nuclear power, primarily around safety. But the U.S. 
Navy and the European power agencies have demonstrated that 
nuclear power can be managed safely; around cost, because 
ratepayers--whom I was in front of Chairman Wellinghoff's 
agency trying to defend--were getting creamed by the cost of 
the nuclear power plants.
    But it appears that as we move more toward modular systems, 
we can manage the cost aspect better; and then the third big 
piece has been disposal, that it creates perhaps the most 
dangerous hazardous waste that mankind is capable of creating 
in terms of its long-term effects, and we don't have a means 
for getting rid of it.
    There is a technology, called traveling wave nuclear 
technology, that appears at least to create nuclear power off 
of our existing nuclear waste stocks without adding to the 
nuclear waste stock, and becomes a net gain in terms of our 
nuclear waste threat exposure. Are you following that? And if 
you would like to take it as a question for the record, since I 
have just run out my time, please feel free to do so, but I 
would like to get the Energy Department's answer on that.
    Mr. Sandalow. I am not personally, but we will get back to 
you on that, Senator.
    Senator Boxer. Thank you, Senator Whitehouse, very much, 
and to all my colleagues.
    I found this to be extremely important, and I thought the 
three of you were very direct in answering our questions, and I 
appreciate it.
    So we are going to follow up with, hopefully, a bipartisan 
letter, and it is going to ask you particularly for the issue 
of how much land is available offshore and onshore for 
renewable development, Mr. Strickland. Then I will also add to 
that, if you could confirm, because I don't want to ask you any 
more questions, if you could confirm that it is true that 68 
million acres of undeveloped offshore oil and onshore oil 
leases are still not in production. Because I think that is an 
important part for all of us that say we need everything. We 
need to know what leases are out there that haven't been acted 
upon. If you could confirm that.
    But I just wanted to thank all three of you very much for 
your time and your answers. Thank you very much.
    Senator Whitehouse. Madam Chair.
    Senator Boxer. Yes.
    Senator Whitehouse. Never mind. You have a second panel. We 
will proceed to that.
    Senator Boxer. OK. Thank you.
    So thank you very much.
    Now we will call up our second panel. It is two very 
important witnesses, Fred Krupp, the President of the 
Environmental Defense Fund; and Bill Fehrman, the President and 
CEO of MidAmerican Energy Company, primarily services Iowa, 
Illinois, and South Dakota.
    Mr. Krupp, are you somewhere out there? Oh, he is trying to 
get through. All right.
    If you can excuse our witness, he needs to get up to the--
thank you very much.
    Well, Mr. Krupp, we will start with you, and then we will 
proceed to Mr. Fehrman, or vice versa. Whatever you two would 
like is fine with us.

 STATEMENT OF FRED KRUPP, PRESIDENT, ENVIRONMENTAL DEFENSE FUND

    Mr. Krupp. That is fine.
    Chairman Boxer, I am honored to be here today. The stakes 
couldn't be higher. On the current path by the end of this 
century, Key West and the Everglades will be under water; the 
American Southwest will be at risk of truly catastrophic 
droughts; and summers in Michigan will be like summers in Texas 
today. These are just a few of the things that we learned from 
the authoritative science report that the U.S. Government 
released this past June.
    And yet I am optimistic. My message is simple: we can 
achieve strong emission targets by 2020; we can achieve those 
targets at low cost; and in meeting those targets, we can 
create new jobs and new businesses.
    So my first point, we can achieve strong targets by 2020. 
This has been studied again and again. The EPA has looked at 
it; the Department of Energy has looked at it; so has MIT and 
McKinsey & Company. These teams of experts have used different 
tools and different assumptions, but they all come to the same 
conclusion: we can cut emissions in 2020 by 17 to 20 percent or 
more below 2005 levels.
    My second point, we can reduce emissions at low cost. The 
EPA has done an exhaustive analysis of H.R. 2454. The Agency 
found that, between now and 2050, the annual cost to the 
average household will be less than the cost of a postage 
stamp, and the poorest families will actually have a few more 
dollars in their pockets. Just 2 days ago, the Energy 
Information Administration, the EIA, came to the same 
conclusion. The cost of the House bill will be very low. 
Between now and 2030, the EIA says that the average household 
cost will be about 22 cents a day, about a dime per person.
    Now, my third point is this: lowering our emissions will 
create new businesses and new jobs. One of the most important 
studies of how we can reduce our emissions was done by the 
respected consulting firm McKinsey & Company. They looked at 
dozens of ways to cut our emissions, and here is what they 
found. This chart, Exhibit 1, that I would like to introduce 
for the record.
    Now, in just one of those areas, just one of those bars is 
coal power plants and the technology CCS, where new builds can 
be done with enhanced oil recovery. And I want to just talk 
about one slice of that bar. CCS, of course, means carbon 
capture and storage. It means capturing the carbon dioxide from 
a power plant or factory and burying it deep underground. There 
are three main ways of capturing carbon dioxide. I am just 
going to focus on one of those, the Choate ammonia process.
    A team of researchers at Duke University has been studying 
the supply chains behind 11 different low carbon solutions. One 
of those solutions is called Choate ammonia technology for 
capturing CO2. You can see here that what Duke found 
about this supply chain. There are dozens of different benefits 
and workers in the work force that will be involved to make the 
Choate ammonia process work.
    Let me just give you a few examples. We will need more 
miners, steelworkers, chemists, pipe fitters, designers, 
engineers--every type of engineer--construction workers, 
computer modelers, geologists, and factory workers to make the 
thousands of different components that will go into the 
finished products.
    Now, finally, the last exhibit, I would like to show some 
of the specific companies around the country that are poised to 
play a role in creating this technology, companies in Virginia 
and Texas and Arizona, New Mexico, just literally everywhere. 
And as you can see, we are just looking at the component 
manufacturers of just one of hundreds of technologies, and 
companies all over the country that will benefit.
    In conclusion, putting a ceiling on greenhouse gas 
emissions is an act of patriotism twice over--it is the right 
thing to do for our kids and grand-kids, and it is the right 
thing to do to help America lead the clean energy revolution, 
as it has led every other technological revolution the past 
century. The time to pass the law is by early December so the 
United States can walk into Copenhagen with the strongest hand 
to create a good treaty.
    [The prepared statement of Mr. Krupp follows:]
    
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    Senator Boxer. Thank you very much.
    Mr. Fehrman, welcome.

   STATEMENT OF BILL FEHRMAN, PRESIDENT AND CEO, MIDAMERICAN 
                         ENERGY COMPANY

    Mr. Fehrman. Thank you. Chairman Boxer, Senator Inhofe, and 
members of the committee, thank you for inviting me to testify.
    MidAmerican Energy Company is the largest utility in Iowa 
and also serves customers in Illinois, Nebraska, and South 
Dakota. Our generation mix is about 50 percent coal, 20 percent 
renewables, 20 percent natural gas, and 10 percent nuclear, and 
we lead the Nation in utility-owned wind generation. Our parent 
company, MidAmerican Energy Holdings Company, is a subsidiary 
of Berkshire Hathaway.
    MidAmerican supports reasonable emission reduction goals, 
and we fully commit to taking the necessary productive actions 
to meet these goals at the lowest possible cost to our 
customers. Controlling costs is critical because the slogan 
``make the polluters pay'' hides the fact that it is our 
customers and your constituents who will actually pay for 
whatever program is implemented.
    Cap-and-trade embraces two concepts. It is the declining 
caps in the Waxman-Markey bill that will force companies to 
make productive investments to reduce greenhouse gas emissions, 
much like the investments described by the first panel. What we 
oppose is the trade part of cap-and-trade and its allowance 
allocation methodology. The bill's market trading mechanism 
imposes an unnecessary second cost on our customers, the cost 
of buying unproductive emission allowances for every ton of 
emissions while they also pay for the new infrastructure to 
actually reduce those emissions. We don't need market signals 
from a trading program to act; we only need the compliance 
targets.
    The bill's formula for distributing free allowances to 
utilities splits them 50/50 between emissions and retail sales. 
Free allowances based on retail sales means that utilities with 
nuclear and hydro generation will receive allowances that they 
do not need. It also means that utilities with coal and natural 
gas generation will not receive enough allowances. This 
inequity will be extremely costly for our customers and the 
customers of our sister utility in the West, PacifiCorp.
    Specifically, MidAmerican will only receive 49 percent of 
the allowances needed to meet the bill's requirements. This 
creates a shortfall of 11 million allowances in just the first 
compliance year, which, at $25 per allowance, will cost our 
customers $276 million.
    In addition, another allocation of allowances, to merchant 
generators, will create an unlevel playing field for regulated 
utilities that make wholesale sales into the same market 
without allowances.
    These are just some of the inequities created by this Wall 
Street allowance trading scheme in its distribution formula. In 
our view, there is no value added by imposing the cost of a 
volatile and speculative market-based trading program on a 
highly regulated industry. The way to remedy this is to give 
States a choice. Keep the caps in place, but permit each State, 
on a utility-by-utility basis, to either participate in the 
trading program or to develop an alternative mechanism for 
working directly with their regulated utilities to meet the 
caps under a State implementation plan without the trading.
    In both cases, the Federal Government would set the 
standards and enforce the penalties for noncompliance as it 
does for many environmental programs today, and the industry 
would then be responsible for implementing the program.
    There is precedent for this approach. While not a perfect 
analogy, when Congress, 2 years ago, raised fuel economy 
standards, it gave auto makers a simple, understandable 
standard and told them to comply. No allowances, no offsets, no 
trading; just a standard and a mandate to meet it.
    However, if you remain wedded to the bill's trading 
mechanism, then all free allowances should be distributed based 
on emissions, like the successful acid rain SO2 cap-
and-trade program it is supposed to be modeled on. Under the 
acid rain program, the free allowances only went to the 
emitters that actually need them for compliance. Under Waxman-
Markey, utilities with nuclear and hydro generation will 
receive billions of free windfall allowances that they do not 
need for compliance.
    The acid rain program gave out 90 percent of its allowances 
to emitters, and the allowances were freely distributed over 
the life of the program. Not here. Under that program the 
proceeds from the auctions are redistributed to emitters that 
have actual compliance obligations. Not here. Under that 
program, once an emitter meets its emission reduction target, 
i.e., meeting the cap, it has met its compliance obligation. 
Not under Waxman-Markey, where a utility could meet its 
emission reduction target and still be required to purchase 
millions of additional allowances.
    Changes to the bill must also eliminate the penalty for 
early action. Utilities around the country have built thousands 
of megawatts of renewable resource in the past decade. Our 
company, for example, has installed around 1300 megawatts of 
wind since 2004. Under this bill, our early action reduces our 
historic emissions and thus reduces our allowance allocations, 
forcing us to buy even more.
    If the goal is to actually reduce emissions, we must 
advance the construction of renewable resources, significantly 
enhance energy efficiency programs, change customer behaviors, 
develop carbon capture and storage, and expand the nuclear 
power fleet.
    I appreciate the chance to be here this morning, Chairman 
Boxer, and would be glad to answer questions you might have.
    [The prepared statement of Mr. Fehrman follows:]
    
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    Senator Boxer. Thank you very much, Mr. Fehrman.
    I have so many questions. I want to talk about the 
speculation issue raised, because I was a former stockbroker on 
Wall Street, so I understand what happens when there is 
speculation, and we have all seen it with futures, and there is 
cause for some concern, and that is why I would not support a 
bill unless it really had very tough oversight.
    But I wanted to ask you and Mr. Krupp this question. In the 
Waxman-Markey bill, they put a floor of $11 on the price. Some 
utilities have come to me and said what about a collar. So I 
would like to ask your response to that, Mr. Fehrman and Mr. 
Krupp.
    Mr. Fehrman. The aspect of a collar would certainly promote 
upside protection on the cost to the customer. But fundamental, 
even with a collar and the allowance trading program, in and of 
itself still would impose a second cost on customers which we 
find would not be productive, and the reason for this is if a 
customer is going to spend a dollar, we want that dollar to be 
spent on actually investing in infrastructure to reduce carbon 
emissions. The need to spend a second dollar to buy an 
allowance to get up to a cap does not seem productive or useful 
for us. So, fundamentally, we would want to stay----
    Senator Boxer. Well, if you are worried about the consumer, 
I am as well, and we are going to make sure our consumers are 
not hurt.
    Mr. Krupp, could you talk about that? Many other utilities 
do support the Waxman-Markey bill, and I understand it is 
probably dependent on their mix and so on. But some are very 
heavily coal, like Duke Energy is very strongly in support of 
this. So if you could talk about the collar, but also this. Get 
back to the point. The Supreme Court said carbon is covered 
under the Clean Air Act, so we are going to clean up. We have 
to clean up the pollution to protect your customers, my 
constituents, everybody. And you talked about, Mr. Krupp, some 
of the issues if we don't do this. So, without getting into 
that, we are going to have to do it. And it just strikes me as 
unusual that a business person would rather choose a hard cap 
and no ability to get allocations, no ability to get offsets. 
It seems to me that is going to really put costs for them 
through the roof and miss the opportunity at all this job 
creation, all the money we need to do coal sequestration, which 
I also strongly endorse.
    So, Mr. Krupp, if you could respond.
    Mr. Krupp. Yes. Thank you.
    MidAmerican is in a very unique position. They have made 
some business decisions that I think, in retrospect, were bad 
business decisions. They just opened a new 800 megawatt coal-
fired power plant in 2007. They wholesale 30 percent of their 
electricity they sell to their wholesale market. Under Waxman-
Markey, the allocations follow the electrons, so the allocation 
goes to the people they are selling to, the customers. So the 
best way to protect the customers is to do it by having the 
allocations go to the LBCs for the benefit of their customers. 
So I think MidAmerican is a very special case that reflects a 
series of decisions that they made.
    Certainly, the proposition you have asked me about 
specifically, a cap but no trade, would be extraordinarily 
expensive to consumers, because trading gives us the 
flexibility to hunt down the lowest cost options. Trading gives 
customers and the companies that serve them the flexibility to 
switch fuels, to do carbon sequestration, to open a new wind 
turbine or a new nuclear power plant, and no trading makes just 
the single utility responsible, and they may not have the 
flexibility to do all these other things, so I don't think----
    Senator Boxer. Could you comment on the collar idea?
    Mr. Krupp. The price collar specifically is just another 
word for a safety valve, and the big problem with a safety 
valve is that it busts the integrity of the cap. It means that 
we are not going to guarantee the environmental reductions. We 
won't be able to say to other nations that we are making 
reductions; therefore, we want you to make reductions, too.
    So the price collar response is a legitimate concern about 
price, but it responds in a way that violates environmental 
integrity. So there are many other things in the Waxman-Markey 
bill that control costs; the whole cap-and-trade mechanism, the 
allocation to the retail consumers. I understand MidAmerican 
doesn't get all the allocation it would like, but the fact that 
the allocation goes directly to the consumers controls prices. 
And in terms of market manipulation, I stand with you, Chairman 
Boxer, whatever comes out of this committee needs to have jail 
time for those who manipulate the market. There should not be 
any exotic derivatives; trading should be publicly on 
exchanges.
    Senator Boxer. OK, I would just ask you to look at a collar 
in a slightly different way, because if we know 11 is the low 
price and we know that at that point we can still give the 
market signal, then I don't know why--and I am not going to go 
into a debate with you--we can't consider this as one way to 
put more certainty. I am looking at it is all I am saying.
    Senator Inhofe, we will give you an extra 40 seconds too.
    Senator Inhofe. Oh, that is fine. Thank you, Madam 
Chairman.
    Mr. Fehrman, were you here during my opening statement?
    Mr. Fehrman. I was.
    Senator Inhofe. And you heard me quote a long, long list of 
Democrat House and Senate members that strongly reject the 
whole concept of cap-and-trade. That is augmented by Jim 
Hanson, who is probably the strongest voice, historically, for 
the limitations of CO2. He said cap-and-trade is a 
temple of doom, it would lock in disasters for our children and 
grandchildren. Ralph Nader, cap-and-trade is not going to work; 
it is too complex.
    So there are a lot of people who join us in saying this 
thing isn't going to work, and frankly, it is not going to 
pass. But you have stated, on the Make Polluters Pay, the 
slogan that they are using--and they are very good at these 
slogans, and you have stated that it is your customers and my 
constituents that are going to pay for this. Now, the other 
side responds and says that the bill's worker adjustment 
protection and consumer refund provision will offset these 
costs. Would you elaborate on that?
    Mr. Fehrman. Absolutely. At MidAmerican, we have not had an 
electric base rate increase since 1995, and we are a leader in 
renewable generation. To Mr. Krupp's comments about our 
mismanagement, if you will, of our company, we obviously take 
exception with that with the fact that we have not had rate 
increases.
    This bill, when you look at the exorbitant costs that the 
trading component of this would add to our customers for no 
value, we just find it unreasonable for us to take those fees 
for allowances and apply that to our customers, when we would 
be much better off taking those dollars, investing in 
additional renewables, additional non-carbon-emitting resources 
such as nuclear, and actually reducing our emissions to meet 
the caps. That is our fundamental issue with this bill.
    Senator Inhofe. Thank you, Mr. Fehrman. You mention that 
you oppose the trading part of the cap-and-trade. Can you 
further explain how purchasing of the allowances and the 
subsequent trading of them will not reduce greenhouse gas 
emissions, I think you said, by one ounce?
    Mr. Fehrman. Correct. Again, when you look at the way the 
Waxman-Markey bill is set up, it takes your 2005 emissions and 
applies a declining cap to that level. There are two pieces of 
the costs, there is the cost of compliance, which is actually 
taking your actual emissions and driving it down to the level 
of the cap; and then there is a second component to this bill, 
which is buying allowances from your very first emission of 
CO2 up to the cap. That cost provides no benefit and 
no value and doesn't reduce CO2 in any manner. The 
cost to reduce CO2 is the cost to change our 
infrastructure and actually reduce emissions.
    Senator Inhofe. Well, I appreciate that. Then I will last 
ask you your view on the carbon capture and storage technology. 
When would it be available, in your opinion, on a commercial 
scale?
    Mr. Fehrman. When we look at carbon capture and technology 
and the opportunities for the advancement of that commercially, 
we find that there is exceptional work going on in the 
industry, there are pilot projects being done, and believe that 
in a number of years, be it 5 years, be it 10 years, that there 
will perhaps be carbon capture and technology applications 
available. However, we would also say, though, that the 
sequestration of carbon pumping millions and millions of tons 
of carbon into the ground has not been studied. We do not know 
the impacts of that, nor do we know the permitting 
requirements, the litigation around that, what happens if it 
burps, so on and so forth. So there are a number of issues 
still from a business perspective that we need clarity around 
in order to fully understand the impacts of carbon capture and 
sequestration.
    Senator Inhofe. It seems to me that I believe and several 
other people believe, in fact, the majority of people believe 
that the technology isn't here in a lot of these things, on 
renewables and other things, and it would just seem to me--and 
I covered this in my opening statement--that if we have all 
these resources and we are the only country that doesn't 
develop our own resources, that we ought to be able to use our 
own resources as that bridge to wherever it goes, whatever 
timeframe out in the future when the technology is there. So I 
appreciate very much your witnessing.
    Thank you, Madam Chairman.
    Senator Boxer. Thank you so much, Senator Inhofe.
    Senator Whitehouse.
    Senator Whitehouse. Thank you very much, Madam Chair.
    With respect to the observation the Ranking Member just 
made, that the technology isn't here, it strikes me that in 
light of our existing incentives, that is sort of a self-
fulfilling proposition. The technology isn't here for some of 
these technologies because we have not met the market in the 
incentives and investment for their development.
    So the technology is in Spain and the technology is in 
Denmark and the technology is emerging in China and the 
technology is all around the world. But I find it 
unsatisfactory as an ultimate answer that we would observe that 
the technology isn't here. That is the problem we are actually 
trying to solve with this piece of legislation.
    I see both heads nodding, and I appreciate it.
    I will confess, Mr. Krupp, that I have been a bit of a 
skeptic on carbon capture and sequestration, carbon capture and 
storage, as you call it. Your testimony says that it is ready 
to roll. Could you elaborate a little bit on that?
    Mr. Krupp. Sure.
    Senator Whitehouse. Make me a little bit more comfortable 
about the prospects for carbon capture and storage.
    Mr. Krupp. Absolutely, Senator. The idea that it is ready 
to roll actually wasn't a phrase original to me, I was quoting 
an official at British Petroleum, noting that in Norway there 
is massive amounts of carbon capture already going on. And to 
your earlier point, the reason it goes on in Norway is there is 
a price on carbon in Norway, so they are avoiding the cost of 
putting that in the atmosphere.
    This observation that you need a driver is exactly the 
chicken and egg problem that Jeff Immelt of GE has pointed to; 
until there is a driver, there is no reason to capture carbon. 
Luckily, many companies are anticipating regulations in the 
United States and some companies around the world, where there 
are already regulations, are developing the technologies; 
Mitsubishi in Japan, Alstom in France. In West Virginia, on the 
Nation's largest coal-fired power plant, Mountaineer, the 
Alstom company has teamed up with AEP to begin installing a 
Choate ammonia process, as was already demonstrated viable in 
Wisconsin by Wii Energy.
    So I agree that EPA will have to write regulations and 
define how carbon can be safely kept underground. Fortunately, 
in the last year, the Bush administration and EPA began that 
task, so that process is well underway. I would reassure you, 
Senator, that our Nation does burn a lot of coal. Half of our 
electricity is generated by burning coal, and we should leave a 
path open to clean up that coal from carbon dioxide, just as we 
have been able to clean it up from sulfur dioxide.
    Senator Whitehouse. And in the same way that I mentioned 
earlier, that the existing arrangement of Government influences 
on the energy market is not a pure state of nature from which 
variance equals interference, there is also not a natural 
state, legally, on this.
    The U.S. Supreme Court has determined as the law of the 
land that carbon is a pollutant subject to Clean Air Act 
regulation. That really gives the EPA no choice but to take 
appropriate action under its lawful responsibilities to 
regulate the emissions of carbon. And if we follow that route, 
which at this point is really a given, since the highest court 
in the land has decreed that this is what shall be, the 
alternative to that is really where we are trying to go with 
the clean energy legislation.
    Would you agree with me that the choice is between a 
regulatory model that would provide for no allowances, no input 
through the legislative process, in any event, versus a 
legislated solution to get to the same result?
    Mr. Krupp. Well, I would agree, Senator, the choice is 
between having EPA regulate or having Congress legislate, and 
there is no question in my mind that having Congress legislate 
a robust and flexible program can protect consumers and 
minimize the cost. Moreover, if Congress fails to legislate, 
then the regulatory process also includes judicial review and 
years of delay, which I think hurts businesses tremendously 
because there are many, many investment decisions about what 
sorts of new power plants to be built that right now are on 
hold because businesses are waiting for the rules to be 
written. Will these rules come out of Congress? Will these 
rules come out of EPA? When will they come out? So I, for one, 
think a legislated solution is preferable. But you are right, 
greenhouse gases will be restricted either way.
    Senator Whitehouse. Madam Chair, thank you very much for 
this hearing. I thank the witnesses for their participation. I 
think we can all agree that businesses do appreciate certainty. 
Thank you very much.
    Senator Boxer. Thank you so much. I think that is very, 
very important.
    Let me just thank both of you. Mr. Fehrman, I am just going 
to put on the record that you operate in South Dakota, right?
    Mr. Fehrman. We do.
    Senator Boxer. OK. EPA calculates that the House-passed 
bill allocates to electric utilities in South Dakota a number 
of emissions allowances that greatly exceeds the amount of 
CO2 emissions that utilities in that State emitted 
in 2008. In 2012, the free allocation is 150 percent of the 
utilities' emissions; in 2015, the free allocation is 144 
percent. So MidAmerican customers in South Dakota will not need 
to buy emission allowances. In fact, they could receive an 
economic benefit through the utility rebates. Do you agree with 
that?
    Mr. Fehrman. I have not seen the study, but our customer 
base in South Dakota electrically consists of an extremely 
small number of customers, so that portion of your study may 
actually be true. A very significant impact is on our Iowa 
customers, which we view as being in excess of a 20 percent 
rate increase. So that very well could be true in South Dakota. 
The fact is our population is very small there.
    Senator Boxer. But your consumers will be kept whole. As a 
matter of fact, your consumers--I mean, there is a difference 
between your shareholders and your consumers, but your 
consumers, some of them will actually come away with $40 into 
the black a year. That is important also, that the study showed 
that the low quintile. So I think there is some confusion, I 
think, between your discussion about your consumers versus your 
shareholders.
    You said something I just want to make sure I heard you 
right, Mr. Fehrman. I think you said that even if you get 
enough allowances to meet your cap, you have to keep buying 
more allowances. I don't think that is accurate.
    Mr. Fehrman. No, what I said was there is a portion of cost 
which applies to meeting the compliance target, so if your 
actual emissions are above the cap in 2012, for instance, there 
is a cost to actually bring those emissions down to the cap, 
either through the purchase of allowances----
    Senator Boxer. Or offsets.
    Mr. Fehrman [continuing]. Or offsets, or investing in less 
carbon such as renewables. You also, however, have to buy 
allowances from your very first ton of carbon that you emit to 
get up to the total cap level.
    So in this case, unlike the acid rain program, you have to 
buy allowances to not only come down to the limit, but come up 
to the limit as well, and that is a fundamental difference 
between this program and the acid rain program, which I think 
that this committee should really try to understand and study 
so that, as exceptionally working program as SO2 is, 
this is not the SO2 program.
    Senator Boxer. OK. Well, I just want to say, Mr. Fehrman, I 
really understand your concern, but I just want you to think 
through this. You are either going to have to deal with the EPA 
in a command and control situation, where you have no ability 
to offset the costs that you are going to be hit with in order 
to protect our kids from pollution--I mean, that is just where 
it is at--or you can work with us on a bill that will soften 
the blow to everyone involved.
    And I would just like to say that it is hard for me to 
understand. I know that the organization that you belong to, 
the Edison Electric Institute, does support Waxman-Markey. And 
I would put in the record the names of all the electric 
utilities and energy companies, manufacturing, corporate 
businesses, labor, farm and agriculture communities, civic, who 
all support the Waxman-Markey bill.
    Now, we are working on it; we are looking at ways to make 
it better. We are looking at ways to make it more friendly to 
the consumer and soften the blow, and all the rest of it. We 
will do that and we will have our bill ready when we get back.
    But I hope you will work with us, sir, rather than just 
stand out there and say no to everything, because I think, from 
your testimony, where I see you going is for the status quo. 
But the problem for you is the status quo is about to change. 
Once that endangerment finding comes into play, there won't be 
any choice but for us to say we have to protect our families 
and we won't have the flexibility.
    We will try and we will do whatever we can, but this kind 
of a bill is going to give us the tools, and I think it is 
going to make your life far more predictable; your consumers 
will be kept whole. We want to work with you, and if you have 
any specific issues or problems, please come and talk to us 
about it, because I just don't see how you benefit--when I say 
you, I mean your company, your consumers, your shareholders--by 
just saying let's not do anything or just go to hard cap. You 
don't think that is going to help you?
    Mr. Fehrman. Well, when you look at our testimony--and I 
very much appreciate your comments. When you look at our 
testimony, I think you will find that we have, No. 1, no 
opposition to reducing CO2. So I want to make that 
crystal clear. We absolutely agree that we can reduce 
CO2. In fact, we absolutely agree that we can reduce 
it in a manner similar to what is in Waxman-Markey.
    Second, if you read my testimony, we have offered 
alternatives both on a hard cap, and second, on alternatives 
that would make the trading component work better and level the 
playing field and remove the inequities that are in the bill 
currently. That is our fundamental issue, is that the way the 
bill is currently set up, it severely penalizes Midwest 
utilities, and we are not alone in this concern.
    Third, and again in my testimony, we want to work with you. 
We have said in our testimony we will come.
    Senator Boxer. Good.
    Mr. Fehrman. We would appreciate workshops. There are 
people out there we know have different views on this than we, 
but we fundamentally believe that we can arrive at a solution 
that takes Waxman-Markey and through the work of the Senate can 
actually deliver similar results at a lower cost to our 
consumers.
    Senator Boxer. OK. Well, we are extremely interested in 
working with you on that and we will do so.
    Mr. Fehrman. Excellent.
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    Senator Boxer. The last point I want to make is, to get 
back to Mr. Krupp, because I think he is seeing all over the 
country some of the pluses of moving forward. The other point I 
would make is what the status quo does is States are going to 
move out on their own. The western Governors, we have the 
mayors all involved, we have the Northeast RGGI. We have the 
EPA. So you are going to have everybody moving without 
certainty.
    But I want to talk to you about my State--just put this in 
the record. We are all going through a horrible recession 
period, and my State was hit very hard by a housing downturn 
and is just starting to come back. In the last few years--and I 
am going to get this right--between 1998 and 2007, California's 
clean energy economy has been driven by significant investment. 
It attracted more than $6.5 billion in venture capital in the 
past 3 years alone. So we have $6.5 billion invested in the 
last 3 years alone, and it is a result of, they say, public 
policies and financial incentives for clean energy development 
and energy efficiencies to renewable portfolio energy efficient 
standards.
    We also have a plan for California's green building, a goal 
for public buildings to be 20 percent more energy efficient by 
2015. So that goal alone would save our State $100 million 
annually. We have seen 125,390 jobs created in this between 
1998 and 2007; 10,209 new businesses formed in California by 
2007 from 1998; and again, just the last 3 years, $6.5 billion 
in venture capital with the understanding from the venture 
capital community that they would invest more. The prediction 
is they would invest more in clean energy jobs in the future 
than they did in the high-tech communications revolution. So it 
is extraordinary. John Doerr has so stated.
    We have seen, between 1999 and 2008, in California, 1401 
new patents. So the unleashing of entrepreneurship is 
incredible, and it has happened because California moved 
forward and set some standards on this carbon, and I just think 
we can all prosper.
    So I want to say to the two of you thank you very, very 
much. We shouldn't fear the future, because the future, if we 
do this right, as our President has said, if we do this reform 
right, we will see a whole new platform for economic growth 
going out into this century. We will go to Copenhagen, we will 
be a leader, and I think America is a place where 
entrepreneurship needs to be unleashed, and these financial 
incentives--that is just going to unleash it.
    And I agree with--I think it was Senator Merkley who said 
some of these dates in the future that we are assuming we are 
going to meet, we are going to whiz by--in other words, we are 
going to get to where we need to go long before the 2030s and 
the 2050s because of this great entrepreneurship and the skills 
that we have in our country with our people and our workers.
    So thank you both very, very much. Of course, this 
conversation continues on, and I look forward to working with 
both of you as we move forward. Thank you.
    [Whereupon, at 12:29 p.m., the committee adjourned.]
    [An additional statement submitted for the record follows:]

                     Statement of Hon. Mike Crapo, 
                  U.S. Senator from the State of Idaho

    Madam Chairman, thank you for the opportunity to share a 
few words. I would also like to thank the witnesses for being 
here with us today.
    I have stated many times in this committee that Idaho is a 
leader in clean energy and that I am proud of Idaho's record in 
this area.
    Nearly 50 percent of Idaho's electricity comes from 
hydroelectricity, and Idaho's energy plan aims for a total of 8 
percent of non-hydro renewable electricity production by 2015, 
which is higher than the national average. Development of clean 
energy is important.
    I am heartened to hear today about DOI's efforts to promote 
renewable energy, but I am concerned because Mr. Strickland's 
testimony today doesn't address the exploration and production 
of another very important clean energy source: natural gas.
    Natural gas is clean burning and is domestically abundant.
    The Colorado School of Mines and DOE estimate that U.S. 
future natural gas supply is over 2 quadrillion cubic feet, 
which at today's rate of consumption is enough to meet demand 
for more than 95 years.
    Additionally, DOI's Minerals Management Service estimates 
that the Outer Continental Shelf alone holds 420 trillion cubic 
feet of natural gas that has yet to be discovered.
    In fact, expanding exploration and production to U.S. 
offshore areas that were off limits until 2008 could result in 
more than a trillion dollars in Government profits and millions 
of new jobs. Oil and natural gas development in newly opened 
offshore areas is expected to generate $1.7 trillion in Federal 
tax revenues and almost $600 million in State and local taxes 
according to the American Energy Alliance.
    Increased offshore energy production would support 1.2 
million jobs annually.
    Also, when we talk about clean energy, I would like to hear 
more about the potential for nuclear energy. I understand that 
Mr. Fehrman is knowledgeable in this field, and I hope to learn 
more about his experience and his thoughts on how to drive 
nuclear investment and jump-start the nuclear industry in the 
U.S.
    I am also interested in hearing Mr. Fehrman's testimony 
regarding MidAmerican's alternate, State-driven proposal for 
emission reductions. After all, States often have the best 
gauge of their own potential and abilities.
    Additionally, PacifiCorp, a subsidiary of MidAmerican 
Energy Holdings Company, provides power to my constituents in 
Southern Idaho, and I would be interested to know how this plan 
would benefit Idaho.
    As we talk today, I hope to hear about all available means 
to unlock the tremendous clean energy potential of the United 
States of America.
    Thank you.